Some European lawyers are accused of being too cautious in the runup to an IPO ("A good lawyer should be trying to facilitate a client's ambitions, not thwart them"). Restrictions on priming the IPO market usually don't generate the same passion as John Mackey or Overstock and Gradient, but they raise the same tensions between free speech and efficient markets that Christine noted here.

Some lawyers think that investors should rely exclusively on the prospectus for information about a company. The problem with prospectuses is that they provide both too much and too little information. Too much because many of the disclosures required by regulators or included by companies (sometimes as a feint) are not material to investors. Too little because what investors really want to know is where the company is going, and prospectuses often have little to say about that.

When it comes to mitigating the tension between free speech and efficient markets, I suspect some would argue that prospectuses are the worst form of communication, except all the others. On the other hand, the best argument against prospectuses is a five-minute conversation with the average investor. (Apologies twice over to Winston Churchill.) 

Law Schools/Lawyering | Bookmark

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8345157d569e200e009956d3d8833

Links to weblogs that reference Prospectuses: