Posted: May 15th, 2016

Do you agree with lawyers’ reasoning? Is there a way out of this dilemma? Discuss (your discussion should not include borrowing as a solution)

b)    After you picked the deal structure, now the CEO wants you to help him with the deal consideration. Note that CreamyDreamy Inc. is valued $10 million and your company has only $6 million in cash, which means BizQuit Corp. must pay the rest of the consideration with stock (for some reason. The CEO says that borrowing is “out of the question”). However, CEO was told by the lawyers that issuing new stock as a deal consideration would clearly be “selling” under section 5 of the 1933 Act and it is unlawful to sell any securities, unless a registration statement is in effect. Since preparing and filing a registration statement is very costly, CEO does not want to do that either.
Do you agree with lawyers’ reasoning? Is there a way out of this dilemma? Discuss (your discussion should not include borrowing as a solution)