ACLE Law & Finance Seminar with Jesse M. Fried (Harvard Law School). Title: "Cheap-Stock Tunneling Around Pre-emptive Rights". The seminar is jointly organized with Finance Group. Venue: Amsterdam Business School.
Corporate law has long relied on pre-emptive rights to prevent a controlling shareholder from economically diluting minority shareholders by selling itself cheap stock. I show that that pre-emptive rights, while making cheap-stock tunneling more difficult, fail to fully protect minority shareholders in most-real world settings. My analysis suggests the potential need for supplemental mechanisms, such as judicial review of equity issuances, to provide adequate protection to minority shareholders.