Valuing 1933 Act Registration Rights

Abstract:     
States follow a number of different approaches to lawsuits alleging breach of contract or tort to value interests that have fluctuating values. This article examines one context where the factors that have produced the variation among jurisdictions are enhanced: breach of an obligation to register securities under the 1933 Act. A review of the pertinent authority identifies assorted miscues-approaches to valuation that are internally inconsistent, violate the weak form of the Efficient Capital Markets Hypothesis or founder for want of an adequately textured principle guiding damage computation. By referencing the component costs associated with creating synthetic registration rights, this article develops a textured principle for valuing breach of registration rights. As part of developing that damage measure, this article examines principles for computing compensatory prejudgement interest. The most thorough prior analysis in legal scholarship argues prejudgement interest should be at the defendant's cost of funds. This article demonstrates, however, that approach is inadequate, because it can shift value from shareholders of a corporate plaintiff to its creditors.

Keywords: Securities registration, breach of obligation, 1933 Act, prejudgement interests

JEL Classifications: K22

Working Paper Series