This Tutorial contains 2 Papers\t\u00a0\tPART A\tPaul and Thomas Geoffries, brothers, are college students and web designers. While at the University of Megalopolis, a private, for-profit college in the “Quad State”\ufffd area, they started an online chat service called FaceSpace.\u00a0 Paul attended and resided at the college’s campus in the State of Quadrahenria.\u00a0 Thomas, who was on probation during college for a low level felony drug conviction, could not be a resident student and took classes at the campus in the Commonwealth of New Guernsey campus.\u00a0 The chat service began by putting information from school’s student directory online, and offering blog, chat and message board features.\u00a0 FaceSpace was such a hit that within a year, the school advised the brothers that they had to remove FaceSpace from the university’s server as it was utilizing too many resources.\u00a0 This was\u00a0 not a problem as the Geoffries found advertisers, so they were able to move FaceSpace to a private server without charging user fees.\u00a0 In fact, FaceSpace was earning so much revenue that the Geoffries brothers were able to pay themselves, and the six friends that helped them operate it salaries.\u00a0 The Geoffries brothers are graduating from the University of Megalopolis, and will be attending separate graduate programs.\u00a0 Paul will attend Quadrahenria State University, and Thomas the College of New Guernsey.\u00a0 As FaceSpace is so successful, the brothers not only plan to expand it to the two new colleges that they are attending, but to as many other colleges within the four states comprising the “Quad State”\ufffd area as possible.\u00a0 They even have hopes of “going national.”\ufffd\u00a0 As part of their plan to expand to other campuses, they expect to recruit a student from each of the new schools “to get them in.”\ufffd\u00a0 They wish to formalize FaceSpace by organizing it as a proper business.\u00a0 The brothers would like to maintain a majority interest in the business, give about 20 percent to the six friends from their undergraduate days that helped them run the service, and use the remaining interest in the business to attract other investors and use employee incentives.\tThe Geoffries seek your advice on (a) the form of business they should use, (b) who might have a claim on the business, and (c) how they might protect themselves from claims regarding a computerized internet platform.\t\u00a0\t\u00a0\tPART B\tFaceSpace has been a phenomenal success for over ten (10) years.\u00a0 They are now a worldwide social networking phenomenon.\u00a0 Over the years and the various incarnations of the business enterprise, they are now a corporation with just under 100 shareholders.\u00a0 In anticipation of a public offering, they have just completed\u00a0 a private stock offering and allowed several of the initial equity owners to exercise stock options.\u00a0 The Geoffries brothers each exercised options to purchase 10,000 shares for $5 a share.\u00a0 Also in anticipation of the public offering, pursuant to the early intervention drug plea he made while in college, Thomas Geoffries had his conviction expunged.\u00a0 In addition, FaceSpace sold $10 million in two (2) year advertising contracts, which would allow the clients to backout for a 90 percent refund.\u00a0 These unusual contracts increased their current revenue by fifteen (15%) percent.\u00a0 As FaceSpace is such a phenomenon, the hype regarding the public offering has been enormous.\u00a0 Even college students are attempting to but the stock.\u00a0 Days before the public offering, the following occurred:\u00a0 (a) a broker at their underwriter, Silversmith & Baggs, showed a pension fund director a draft version of the prospectus; (b) Paul sold 1000 shares of the stock that he purchased through the the stock option plan for $45 a share, telling the private investor that the issue price for the public offering would be at least $60 a share; (c) several of the people who bought stock in the private offering sold it at a nice profit.\u00a0 The initial public stock offering had many problems.\u00a0 The NASDAQ computer system could, which was implemented pursuant to a recent regulation change by the Securities And Exchange Commission (SEC) could not keep up with the demand.\u00a0 The system, could not accurately report the price, and many day traders, including Big Profit Hedge Fund, lost money.\u00a0 Big Profit had formally filed its opposition to the SEC’s regulation when it was proposed.\u00a0 After the public offering was completed, FaceSpace stock stabilized at $40 a share, well below the initial offering price of $70 a share.\u00a0 In light of the fiasco of the public offering, and the bad press that it generated, users began to drop FaceSpace in favor of a new, upstart rival service offered by TronCom.\u00a0 Fearful that the new advertisers would back out of their contracts, the Geoffries brothers sold a great deal of their stock.\t\u00a0\tWhat issues does FaceSpace, its officers and stockholders face under (a) state securities law, (b) the Securities Act of 1933, and (b) the Securities and Exchange Act of 1934.<\/p>\n","protected":false},"excerpt":{"rendered":"
This Tutorial contains 2 Papers \u00a0 PART A Paul and Thomas Geoffries, brothers, are college students and web designers. While at the University of Megalopolis, a private, for-profit college in the “Quad State”\ufffd area, they started an online chat service Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-227127","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/227127","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=227127"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/227127\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=227127"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=227127"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=227127"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}