Question

I need your help about case analysis.
Case Study based upon

the Facebook movie “The Social Network.”

I attached all details. ATTACHMENT PREVIEW Download attachmentPART APaul and Thomas Geofries, brothers, are college students and web designers. While at the University oFMegalopolis, a private, For-pro±t college in the “Quad State” area, they started an online chat servicecalled ²aceSpace.Paul a³ended and resided at the college’s campus in the State oF Quadrahenria.Thomas, who was on proba´on during college For a low level Felony drug convic´on, could not be aresident student and took classes at the campus in the Commonwealth oF New Guernsey campus.Thechat service began by puµng inForma´on From school’s student directory online, and ofering blog, chatand message board Features.²aceSpace was such a hit that within a year, the school advised thebrothers that they had to remove ²aceSpace From the university’s server as it was u´lizing too manyresources.This wasnot a problem as the Geofries Found adver´sers, so they were able to move²aceSpace to a private server without charging user Fees.In Fact, ²aceSpace was earning so muchrevenue that the Geofries brothers were able to pay themselves, and the six Friends that helped themoperate it salaries.The Geofries brothers are gradua´ng From the University oF Megalopolis, and will bea³ending separate graduate programs.Paul will a³end Quadrahenria State University, and Thomas theCollege oF New Guernsey.As ²aceSpace is so successFul, the brothers not only plan to expand it to thetwo new colleges that they are a³ending, but to as many other colleges within the Four statescomprising the “Quad State” area as possible.They even have hopes oF “going na´onal.”As part oF theirplan to expand to other campuses, they expect to recruit a student From each oF the new schools “to getthem in.”They wish to Formalize ²aceSpace by organizing it as a proper business.The brothers wouldlike to maintain a majority interest in the business, give about 20 percent to the six Friends From theirundergraduate days that helped them run the service, and use the remaining interest in the business toa³ract other investors and use employee incen´ves.The Geofries seek your advice on (a) the Form oF business they should use, (b) who might have a claimon the business, and (c) how they might protect themselves From claims regarding a computerizedinternet pla¶orm.PART B²aceSpace has been a phenomenal success For over ten (10) years.They are now a worldwide socialnetworking phenomenon.Over the years and the various incarna´ons oF the business enterprise, theyare now a corpora´on with just under 100 shareholders.In an´cipa´on oF a public ofering, they havejust completeda private stock ofering and allowed several oF the ini´al equity owners to exercise stockop´ons.The Geofries brothers each exercised op´ons to purchase 10,000 shares For $5 a share.Also inan´cipa´on oF the public ofering, pursuant to the early interven´on drug plea he made while in college,Thomas Geofries had his convic´on expunged.In addi´on, ²aceSpace sold $10 million in two (2) yearadver´sing contracts, which would allow the clients to backout For a 90 percent reFund.These unusual

View the Answercontracts increased their current revenue by fFeen (15%) percent.As ±aceSpace is such a phenomenon,the hype regarding the public o²ering has been enormous.Even college students are aTemp³ng to butthe stock.Days be´ore the public o²ering, the ´ollowing occurred:(a) a broker at their underwriter,Silversmith & Baggs, showed a pension ´und director a draF version o´ the prospectus; (b) Paul sold 1000shares o´ the stock that he purchased through the the stock op³on plan ´or $45 a share, telling theprivate investor that the issue price ´or the public o²ering would be at least $60 a share; (c) several o´the people who bought stock in the private o²ering sold it at a nice proft.µhe ini³al public stocko²ering had many problems.µhe NASDAQ computer system could, which was implemented pursuant toa recent regula³on change by the Securi³es And Exchange Commission (SEC) could not keep up with thedemand.µhe system, could not accurately report the price, and many day traders, including Big ProftHedge ±und, lost money.Big Proft had ´ormally fled its opposi³on to the SEC’s regula³on when it wasproposed.AFer the public o²ering was completed, ±aceSpace stock stabilized at $40 a share, well belowthe ini³al o²ering price o´ $70 a share.In light o´ the fasco o´ the public o²ering, and the bad press thatit generated, users began to drop ±aceSpace in ´avor o´ a new, upstart rival service o²ered by µronCom.±ear´ul that the new adver³sers would back out o´ their contracts, the Geo²ries brothers sold a greatdeal o´ their stock.What issues does ±aceSpace, its o¶cers and stockholders ´ace under (a) state securi³es law, (b) theSecuri³es Act o´ 1933, and (b) the Securi³es and Exchange Act o´ 1934.

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