NARRATOR: Thanks for joining this episode of the No. 86 lecture series, where we discuss basic principles and applications of Corporate Law along with landmark cases. Today’s episode features Robert T. Miller, the F. Arnold Daum Chair in Corporate Finance and Law. Professor Miller’s research concerns corporate and securities law, the economic analysis of law, and the philosophy of law. As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker. Professor Miller, most lawyers would not claim to be financial experts. But corporate lawyers need to understand how markets work, as well as the financial regulations that companies must follow. In this episode, can you give us an overview of the basic principles that govern corporate finance? The primary insight of modern corporate finance is the principle of present value. If I asked you, what would you rather have, a 100 dollars today or a 100 dollars a year from now? Which would you choose? Obviously you would take your money today, but why? One possibility is that you're worried that I won't pay a 100 years from now. That's what we call credit risk. The risk that you won't get something you're actually entitled to. Another thing you might be worried about is that your 100 dollars a year from now will be worth less than your 100 dollars today in terms of its purchasing power, because prices will go up. The thing that you could buy today for $10 will cost you $12 a year from now because of inflation. If that's the case, then your 100 dollars a year from now is worth less than your 100 dollars today, that's inflation risk. Another thing you could be worried about is this. If you took your 100 dollars today and put it in an investment earning 5%, then a year from now, you would have 105 dollars instead of 100 dollars. That's the time value of money. The fact that if you have money earlier, you can invest it at a positive interest rate and end up with more money later. So the primary insight of corporate finance is that money later is worth less than money earlier. So if you wanted to ask yourself for example, which is better, 100 dollars today, or 100 dollars a year from now, it's obvious it's 100 dollars today. But suppose the question is, what's better 100 dollars today or 107 dollars a year from now. Then that becomes difficult. One way of answering the questions is to ask yourself at what interest rate could I invest today, if I had my 100 dollars? If the answer is less than 7%, so that if I could only invest today at say 6%, so that a year from now I'd have 106 dollars, that's not as good as 107 dollars a year from now. So at least if you're sure of getting the 107 dollars a year from now, maybe therefore the 107 is better than the 100 today. So one way of discounting future values to present values is to ask what interest rates you could invest in today in order to turn present values into future values. You can do careful empirical studies that use market data to price what the pure time value of money is. And most of these studies tend to show that the market price for the pure time value of money is around one to one and a half percent. So in any interest rate, the first 1% you have to pay is for the pure time value of money. On top of that, you have to pay for the expected inflation rate. Now, fortunately in the modern era, inflation rates are fairly predictable. The federal reserve is doing a good job if interest rates are predictable, including changes in inflation. It's doing a very poor job if they become unpredictable. And at least since the mid 1980s, there's excellent statistics to show that interest rates have become considerably more predictable since that time period than they were before. The federal reserve aims for a 2% inflation rate, just like the European central bank does. So assuming the Fed's going to do a good job, you should expect on average about a 2% inflation rate between this year and next. So we have 1% for the pure time value of money, another 2% for inflation, and then a premium reflecting other types of risk. And there's, what's known as market risk and credit risk. And I won't get into the details of that, but there's a risk premium on top of the pure time value of money and inflation. When you are discounting future cash flows, you should measure the riskiness of those cash flows and establish your risk premium appropriately. That's a rather difficult thing to do, and it involves using various types of financial models. And there tends to be a lot of disagreement about them and a great deal of judgment calls, but you can see how this is reflected in the real world by looking at the returns on different types of investments. Bonds are less risky than stocks. That's why they pay a lower rate of return. Among stocks, large cap stocks are less risky than small cap stocks. So large cap stocks pay a higher rate of return than bonds, but a lower rate of return than small cap stocks. Small cap stocks are among the most risky of the publicly available investments and therefore they pay the highest rate of return. What is the difference between a public company and a private company? Is it primarily a financial distinction? The distinction between public and private companies arises because of the Securities Act of 1933. Under Section 5 of that act, if anyone sells a security, a share of stock, a bond, to anyone else, that sale has to be registered with the Securities and Exchange Commission. That is a remarkably broad provision. The good news, however, is that there are a great number of exceptions from that provision. So the vast majority of the time, anybody invests in a company, buying shares of stock or what we call membership interest in a limited liability company, one of those exceptions applies. And the sale does not need to be registered with the Securities and Exchange Commission. Those are the so-called private companies, and the transactions in which you buy securities in a private company is called a private placement. The sale of securities to the public, is in the first instance, the IPO when a company first goes public. And then after it's public, it's very easy for a company to sell additional securities to the public. So you get so-called secondary offerings. So the distinction between private companies and public companies actually arises as a matter of the federal securities laws. I said earlier that the federal securities laws are in some way, a consumer protection statute. That hits the road right here, in the sense that sometimes people attempt to sell securities in a private placement. But what they are in effect doing, is selling securities to the public. And then they get charged with violating Section V by engaging in an unregistered sales securities to the public. So if you are an investor in a public company, you will receive quarterly reports in the Form on form 10-Q. You will receive annual reports on form 10-K. You will receive an annual proxy statement. And what information goes into those filings is in part, determined by the rules of the Securities and Exchange Commission. It's really important to note, however, that some of the most important information that anyone ever gets about a company is not required to be disclosed under the federal rules. For example, what most investors care about are earnings projections. On a quarterly call with the CEO and the CFO, many companies will say, we back to earn $1.20 a share this year. And for next year, we are hoping it's going to be $1.30. They provide so-called earnings guidance. This forward looking information, which is critically important for valuing a company is not required to be disclosed. And there are some companies that it don't give earnings projections, but most do. And this shows you something very important about securities markets. Why do companies disclose information? Because they're required to do so? Well, yes. When they are required to do so, they'll follow the law and disclose required information. But even if there were no federal laws, companies would disclose a great deal of information because investors demand it. If you're going to have people invest in your shares, and companies want that to happen, why then you have to keep the investors happy. And one of the things investors want is information about their investments. Does that mean the federal securities laws are useless? No. Federal securities laws actually serve one very important function, in that they make disclosures from public companies uniform. They not only make them uniform in the sense that they're all available on the SEC's website in one place, but they also make it easy to compare one company to another, because people more or less disclose information in the same format. That's actually incredibly efficient and a real benefit of the federal securities laws. You can consider the most important aspect of this in how financial information is presented. By law, financial information has to be presented in accordance with generally accepted accounting principles, G-A-A-P pronounced GAAP. This is very important because if you know what GAAP is, once you look at the numbers on the page, you know what they mean. If we all used our own set of accounting principles, the numbers would quickly become meaningless. So the paradigm case of uniformity and disclosure is the requirement that people produce GAAP financial statements. The federal securities laws imposes uniformity of disclosure on non-financial disclosures as well, executive, compensation, and many, many other things. And that has a legitimate benefit as well. The bad side of federal securities disclosure is that it often requires companies to disclose information that rational investors simply don't want. There's a provision in the Dodd-Frank Act that requires public companies to disclose lots of information about the presence of certain minerals in their supply chain, because those minerals are conflict minerals that were funding certain conflicts in West Africa that were ongoing at the time of the Dodd-Frank Act. It would seem to me clear that the best way to deal with people who are buying and selling conflict minerals and funding very bad activities in war zones is not through federal securities disclosure. If you want to prohibit those types of transactions in order to cut off funds for terrorist groups or other bad actors, that's probably a very good idea. But merely co-opting public companies into disclosing about it is a bad idea, mostly because the vast majority of companies have nothing whatever to do with conflict minerals. And yet now, they have to spend a great deal of information checking through their supply chain to make sure there isn't some tiny amount in some subsidiary that operates in Malta or some other place that might actually qualify and for disclosure under this provision. That's sort of the downside of federal securities law. Another downside of federal securities law is what professor Stephen Bainbridge at UCLA, calls therapeutic disclosure. In other words, there's some behavior the SEC doesn't like, but it has no authority to prohibit that behavior. So instead, it requires the company to disclose whether or not they engage in that behavior, and if they do, to explain why. So for example, under certain provisions of new rules enacted by NASDAQ, the securities exchange, public companies traded on NASDAQ have to explain whether they have a certain levels of diversity among their boards of director members. And if not, why not? That's an example of therapeutic disclosure. It's not the type of information most investors would ever care about, but nevertheless, a regulator has decided it's important, but lacking authority to actually make the companies do what the regulator thinks, it makes the company engage in therapeutic disclosure. Are you doing what I think you ought to be doing? If not, please explain in public, why. It's obvious what's going on here. It's an attempt to coerce the company or embarrass the company into doing what the regulator wants, even though the regulator has no legal authority to require that. One wonders if that's really how the law's supposed to work. Do you have anything else to add about Securities Law and how it functions? Securities Law is an oddly bifurcated bit of law. On the one hand, it is law for public companies telling them what they need to do, when for example, they are asking their shareholders to vote on something. Those are the so-called proxy rules. If one company offers to purchase all the shares of another and makes that offer directly to the shareholders, then they have to comply with the tender offer rules. So there are certain parts of the laws that are aimed at very sophisticated parties, public companies usually, and their investors. And those parts of the law are perhaps complicated to comply with, burdensome to comply with. But those are very wealthy entities that hire very sophisticated lawyers to draft documents that comply with the law. And in the vast majority of instances, those documents comply, and the transaction moves forward. It might cost you a million dollars in legal fees, but it happens in the transaction moves forward. The other aspect of federal securities laws is that the laws are effectively, a consumer protection statute, probably the first in federal consumer protection statute in history. Because in the 1930s, most investors were retail investors, wealthier individuals, but not super wealthy individuals, who were purchasing a small number of individual stocks in a relatively small number of companies. In situations like that, there was a gross, informational asymmetry between the company and other market professionals on the one hand and the retail investors on the other. And the theory of federal securities regulation at its inception was the government was going to step in and protect those little guy investors, the retail investors, against the public companies and the other market professionals who had such an advantage over them. How much that model continues today is a good question. Most shares and most public companies are now owned by very sophisticated financial institutions who most certainly do not need the protection of the act. There are still some retail investors, but not all that many. Moreover, it's a good question whether any retail investor could ever rationally go about investing in any individual stock. Corporate finance has what's known as the Efficient Capital Markets hypothesis. And one implication of this hypothesis is that it is effectively impossible for a retail investor to pick stocks and end up with a return superior to the return he would get if he owned all these stocks in the market, generally, through a mutual fund that invests in the whole market. Rational investors today would probably be invested in a broad index fund like a mutual fund that exposes them to the whole market in general, and therefore reduces their risk to the general risk level and the economy. Nevertheless, the SEC continues to try to protect individual investors. This often produces some very strange results. So when last time I taught securities regulation, I had my students read the S1 of the registration statement filed by Snapchat when it was about to go public. Now, if you were to buy these shares, or if you were thinking about buying these shares, the thing you would care about most, if you're a rational investor, is whether the shares were worth the price. If I remember correctly, Snapchat was going public at about $17 a share. So the question is, are the shares worth $17. How would you figure that out? Well, if you're a sophisticated financial person, you would create a discounted cash flow model to value Snapchat, and you would need cash flow projections and a bunch of other assumptions. And then you would run your model and see if the shares had a present value greater than, or less than $17 per share. So the first thing you would need is a great deal of financial sophistication, which most retail investors don't have. And then you would need some critical information like cashflow projections for the company. But you could read the 120-page S1 that Snapchat filed with the Securities and Exchange Commission. And you would find a great deal of information there, but you would not find cash flow projections. Those might have become available in the road show that Snapchat did. And then they would eventually get filed with the SEC, but not in the critical document of the S1. For many years, many people have argued that securities disclosure is essentially dysfunctional, because the SEC maintains the myth that it is aimed at retail investors. And effectively, it is not. There are small numbers of retail investors, but even given all the information they would really need, most of them do not have the financial sophistication to use it appropriately. The real audience for securities disclosure are the professional investors, people like Vanguard and State Street and BlackRock that have literally trillions of dollars under management, as well as hedge funds and other professional investors, who are out trying to beat the market. Those very sophisticated people use that information. And it very well might be a better system for everyone if that information were more tailored to their needs than to the alleged needs of retail investors, who probably aren't reading, much less using in an appropriate way, whatever information they get in securities filings. You made reference to “the Efficient Capital Markets Hypothesis.” What is that? So, you've probably heard of the efficient capital markets hypothesis. In its semi strong version, the hypothesis holds that all publicly available information about a security is accurately and quickly priced into the security. The price will accurately and quickly reflect all the publicly available information about the security. Now, some people have said that the bubbles, and bursts of bubbles that we've seen in the last 20 years, disprove the efficient capital markets hypothesis. I want to explain to you why that's wrong. Take for example, the tech bubble of the late 1990s. When I was in law school from 1994 to 1997, the internet was a new thing under the sun, and the amount of information moving over the internet was, for a long time in that period, literally doubling every 100 days. And the result of this was a gigantic run up in the price of a bunch of different tech stocks. That bubble slowly burst, it was a slow motion burst in 2000, 2001, and people have argued that because it was so irrational how high the prices went during that time period, the efficient capital markets hypothesis can't possibly be correct. I want to start with a simpler version of one, security, and then I'll come back to the tech bubble. Imagine you have a company that's developing a new drug, and the company puts out accurate information that says early trials of this drug are very promising. And on this basis, the price of the stock rises. And then subsequent trials are very promising, and the company puts out accurate information about that, and the price goes up even higher. In each instance, the price is going higher because people anticipate that in the future, several years down the road, when drug testing is done, and the drug goes on the market, the company will make a lot of money from selling this drug, and based on the information they then have, that sounds right. That is right. But then at the final stage, when we're about to start marketing the drug, and the stock price of the drug company is now quite high, it turns out that we discover the drug produces horrible side effects, and can't possibly be marketed. All the money we've invested in the drug is lost, and there will not be any revenues in the future from this drug. What happens to the stock price? Well, it crashes, of course, down to the price that the stock held before we even started talking about this drug. The stock price ran up, and then it crashed. Is there anything in that story that leads you to think that stock pricing is not efficient? The answer to that is obviously no. At each stage along the way, the stock price reflected all the publicly available information, and reflected it accurately. No one ever thought that the drug was for sure going to come online and make a lot of money, they just thought it was very likely. Indeed, they thought it was more and more likely, until the very end, when it became clear that it was not likely at all that that was going to happen. And at each phase of this story, the stock price reflected the best possible guess about the future cash flows of the company. Now, go back to the internet bomb. In the early days of the internet, what happened was the following. There was something new under the sun; the internet, which made it clear, that in some ways that were not clear yet, a lot of people were going to be able to make a lot of money on this internet thing. When that happened, what investors essentially did is each took his or her best guess about which companies were going to make money on this internet thing. At that point, the one thing you can be sure of, is that given the newness and uncertainty of the technology, whatever the market guessed was not going to be right, it was either going to be too optimistic, or too pessimistic. If the market guess had been too pessimistic, stock prices would've been too low. The internet would've gone on, people would've started making more money, they would've been making so much money it would become apparent that the stock prices were too low, and the prices would've gone up to account for that. But if the guess is too high, then the stock prices go up, and they go up quite high, indeed. When it becomes clear that not that many companies are going to make quite that much money off the internet, the price falls. Just like it became clear with our drug company stock that the price of the drug company stock had to fall when our drug wasn't going to work out. At each step along the way prices were correct, but changing information meant that a different price was correct at a different time. There's nothing inconsistent between market bubbles and bursts and the efficient capital markets hypothesis. And if you go back and look at a lot of other stock market crashes in the past, you'll find a very similar pattern. Often, there is some new technology or new way of doing some things that is a genuinely good thing, just like the internet. A genuine opportunity for a lot of people to make a lot of money; a lot of companies to make a lot of money, and have much higher earnings than they did in the past. In the 1920s leading into the stock market crash of 1929, the rationalization of American industry on the assembly line and Henry Ford created the opportunity for many companies to make a great deal more money. Innovations and consumer finance allowing people to buy consumer durables on time when they couldn't in the past opened up new markets for these products. All of those were good things. The problem comes when people overestimate the good things, and stock prices then climb higher than they really should be. When it becomes clear that the estimate was an overestimate rather than an accurate estimate, that's when you get a stock market crash. Nothing in that story is inconsistent with the efficient capital markets hypothesis. What if a company employee has advance information that a crash is coming and sells off their shares? Why is insider trading penalized? So let's talk about insider trading for a moment. The paradigm case of insider trading involves a corporate insider, a director, or an officer using information he or she acquired in the course of his employment with the company to trade the company's stock when the insider knows better than the market, generally, about the value of the shares. So, in the most troubling case, the insider might learn some terrible new information. The drug we're developing isn't going to work. Someone's been cooking the books, and the numbers we've reported for the last few years are fake. When this comes out, it becomes clear that the stock price will crash. The insider sells his or her shares before all this comes out, and is preserved from the loss that everybody else suffers. In particular, the poor shareholder who bought shares from this insider will take a huge loss that the insider would otherwise have to have born by his or her self. Insider trading is illegal. Why is it illegal? It's one of the more complicated stories in the law. Section 10B of the Securities Exchange Act makes it illegal for anyone to engage in a fraudulent or deceitful practice, in violation of a rule promulgated by the Securities and Exchange Commission. Well, the Securities and Exchange Commission has promulgated Rule 10-b5, which is the general anti-fraud provision of the federal securities laws. 10-b5, on its terms, doesn't say anything about insider trading, but it has been interpreted by the SEC and the courts to prohibit insider trading. The problem with all this, however, is that section 10(b), and therefore Rule 10-b5, require some type of deceit or fraud in order for an action to fall within the ambit of the rule. One supreme court case famously said that rule 10-b5 is a catchall provision, but what it catches must be fraud. How is it fraudulent for someone to engage in insider trading? When an insider trades his securities on a securities exchange, for example, the insider certainly doesn't say anything to anyone that's false. He also doesn't omit to state a fact that makes what he has said misleading. This is the general fraud standard. And if he neither said anything false nor said anything misleading, how did he defraud anybody merely by selling his shares? Well, under the misappropriation theory of insider trading, the argument goes like this. The insider had a fiduciary duty to the company for which he works to use the information that he becomes privy to as an insider for the benefit of the company. He has a fiduciary duty to do that. When he breaches that duty, it uses the information for his personal benefit, trading the securities, well, that's fraud-like or deceptive at least, and therefore it comes within the ambit of the statute, and therefore the ambit of the rule. Maybe. It's probably correct to think about things in that way, but I would suggest to you, there's another way of thinking about insider trading that's worth thinking through, and that is this. If it were legal for insiders to trade securities on the basis of material non-public information, as we say, would companies ever allow their employees to do that? There have been people in law and economics who have famously argued that they might, and if they wanted to, they should be allowed to. What I would suggest to you is, it's hard to imagine any company ever doing that. Why? Well, if you look at how existing forms of equity compensation work, when companies pay their employees with stock options or shares of stock, they have to record the costs of those options and shares that the company bears, and that the employee gets when he gets paid that way, companies have to record those expenses as expenses. They pay the employee some cash compensation in the form of salary, they pay for some healthcare benefits, and they pay part of the compensation in the form of shares. Those expenses all get recorded on the company's financial statements. If a company was to compensate its insiders, its employees, by allowing them to insider trade, the problem would be that the company would not know how much it's paying its own employees. It has no good way of monitoring the employee's trading activities. It can demand that the employees tell the company what their trading activities are, but if the employee lies, the company has no way of detecting that lie. So a company that allowed its own employees to insider trade would very quickly lose control of its own compensation expense. It wouldn't know how much it was paying its own employees, and I would suggest to you that no company in it's right mind would ever sign up for that proposition. So companies have a natural incentive to want to prohibit insider trading. The problem is that they would have almost no ability to enforce a prohibition on insider trading, and the reason they would have no ability to enforce a proposition on insider trading is that they just don't know what their employees do on their off time. If you require your employees to turn over all their brokerage records, well, an employee could just have his brother or his sister trade the securities for him, or he could just open up a brokerage account and not turn over that brokerage statement to the company the way he turns over the ones where he doesn't engage in insider trading. The government, on the other hand, has an advantage in enforcing insider trading laws. The government can directly regulate securities exchanges, it has the subpoena power to require people to turn over documents, even when they don't want it, and most important of all, there's punishment. If companies regulated insider tradings by themselves, when they caught one of their employees insider trading, about the worst they could ever do to the employee would be to fire him or her. They could try to sue the employee and recover the money, but odds are they probably wouldn't. When employers catch employees engaged in other form of wrongdoing, they tend to just fire the employees. When the government catches you insider trading, however, they can put you in jail, and they customarily do. Insider trading is difficult to catch. If you want to achieve sufficient levels of deterrence, you therefore have to really punish severely the few people you do catch, and that means jail time. So, what we really have is an interesting combination of public and private law here. A company hiring employees and paying them cash and stock and other forms of benefit would want the employees to not engage in insider trading. It might find it very much in its interest to pay its employees with stock because that aligns the employees incentives with that of the stockholders, but it also opens up the possibility of insider trading, and the company can't effectively prohibit insider trading. The government, on the other hand, can do at least a better job, probably, than the company can in prohibiting insider trading. So we get a public prohibition of conduct that private employers would probably want to prohibit, but might not be able to effectively prohibit on their own. Final question for this episode on corporate finance. How is a company’s worth evaluated? So how much is a company worth, anyway? The standard answer in academic finance, the standard way most investment bankers will value a company, is called discounted cash flow analysis. You begin by asking yourself, how much money will this company make in the future? And when I say the future, I mean between now and the end of the world. Companies tend to make cashflow projections for a certain number of years in the future, usually not to exceed five years; occasionally a company in its early stages might make 10-year cash flow projections. How accurate are they? Not very. But they're often the best one can do, if one's trying to predict the future and how much a company is going to make. So you need to create a measure of the free cash flow; the amount of money that somebody who owns the company could take out of the company every year while the company continues in existence to make money next year. So if you know anything about accounting, you will know that on a company's income statement, the top line is called revenue. The total amount of money that comes in. After that, there are expenses: paying for raw materials, paying the rent, paying employees' salaries, paying interest on debt and so on. And after expenses, you're left with earnings. Now, earnings turn out to be not the best measure of cash flow, because sometimes there are charges against earnings that are not real cash deductions. If you have to depreciate your equipment, for example, you will see a charge for depreciation on an income statement that does not actually mean cash going out of the company. Same thing with something called amortization. Investment bankers and academic finance professionals therefore tend to use what's known as EBITDA. E-B-I-T-D-A. Usually written in all caps. And it stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. I already have mentioned depreciation and amortization. They put the DA in EBITDA. But we also look at Earnings Before Interest and Taxes. Why? Because how much you pay in interest is entirely a function of how much debt you decide to take on. Different people owning the company might decide to put more or less debt on it. So we like to separate that decision from the cash-generating capacity of the company. How much you pay in taxes depends on, among other things, how much you pay in interest, because interest is usually tax-deductible. So it makes no sense to keep taxes in there, if you're taking interest out. Plus, how much you pay in tax can also depend on things like your tax position with carryforwards and carrybacks and so on. So since that is unrelated to the actual cash generating capacity of the company, we take out taxes, too, to get to EBITDA. So then we project the EBITDA for the company into the future. This is an incredibly complex exercise. This one Delaware case involving evaluation of a company in which the cash flow projections to get to its EBITDA involved more than 1500 inputs. So it's difficult to do. But we get our EBITDA projections for five years, and then we have to discount them back to present value. How do we do that? We have to calculate the right interest rate to do that at. The interest rate here, or the discount rate, more properly so called, should reflect the riskiness of the cash flows. Cash flows that are certain get discounted less. Cash flows that are risky get discounted more. And you can use what's known as the capital asset Pricing Model to calculate the correct discount rate, in this instance. If you want to know more, you need to take my corporate finance class. But after we do that, we have discounted cash flow projections for five years. We have a discount rate to bring them back to present value. But what about all the cash that will be made in the company from year six to the end of the world? Doesn't that matter? The short answer is, it matters a lot. If you look at the value of most publicly-traded companies, and you look at the publicly-available cash flows for those companies, and you look at what's the right weighted average cost of capital to apply to those companies, you will discover that probably between 60 and 80% of the value of most companies comes from cash flows that are expected in year six or later towards the end of the world. So you have to calculate what finance people call the terminal value. The value of the cash flows from year six to the end of the world. And there are several sophisticated ways of doing that. Well, you have to do all of that, and then you will get, roughly speaking, the present value of all the future cash flows of the company. That's how much economists or financial professionals or investment bankers think the company is worth. One of the earliest parts of the negotiation in any business combination deal is an argument over what's the price. And what's the price, right, will be largely determined by, what are the future cash flows? People will tend to agree on the discount rates. They'll tend to agree less on what are the future cash flows. That's one of the most important areas of any business negotiation. But, happily or unhappily, depending on your point of view that usually happens without the lawyers in the room. That's very largely settled by the business people and their investment bankers. Thank you for listening to this episode of the No. 86 Lecture series on Corporate Law. The spirit of debate of our Founding Fathers animates all of the No. 86 content, encouraging discussion and critical reflection relative to how each subject is widely understood and taught in law schools and among law students. Subscribe to the No. 86 Lecture series on your favorite podcast platform to have each episode delivered the moment it’s released. You can also go to no86.fedsoc.org for lectures and videos on Federalism, Contracts, Jurisprudence and more. Thanks for listening. See you in class!