How much should an investor pay for one share of stock in Yahoo? Or a share of stock in America Online? As publicly traded companies, one need only consult the stock charts in any local newspaper to determine the value the market has placed on these shares. Despite what many Internet sector analysts have professed to be astronomically high valuations, these publicly traded companies possess easily verifiable valuations determined by the free market forces that constitute the building blocks of our economy, and safeguarded by the oversight of federal regulators such as the Securities & Exchange Commission ("SEC"). But what about shares of stock in a small non-public start-up Internet company called "FreeStockOverTheInternet.com," the ownership of which is evidenced solely by cyber-shares? How much should someone pay for a share in that company? And how does one value a share of FreeStockOverThelnternet.com?... This Article begins, in Part I, with an analysis of various Internet-based share distribution programs, including share distributions through referrals, share distributions through contests or sweepstakes, and programs for the distribution of contingent interests in shares of stock. Part II of this Article examines the value of the personal information provided by individuals when registering for shares of stock in light of the increasing use of this information for marketing, advertising and resale to third party information brokers. Part III begins with a review of pre-Internet case law pertaining to the use of corporate spin-offs as a means of distributing free shares of stock. It then analyzes the response by the SEC to a number of companies that sought permission to distribute (and in some cases did in fact distribute) shares of stock in exchange for the provision of personal information. Finally, Part IV analyzes other laws that companies should consider before offering these Internet-based share distribution programs, and concludes that, based upon the value attributed to personal information, certain share distribution programs could violate state pyramid and gambling laws.
Joel M. Schwarz,
Looking a Gift Horse in the Mouth: An Analysis of Free Internet Stock Offerings,
Mich. Telecomm. & Tech. L. Rev.
Available at: http://repository.law.umich.edu/mttlr/vol6/iss1/4