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Jesse M. Fried, Firms Gone Dark, 76 U. Chi. L. Rev. 135 (2009).


Abstract: The securities laws currently permit certain firms to exit the mandatory disclosure system even though their shares are held by hundreds (or even thousands) of investors and continue to be publicly traded. Such exiting firms are said to "go dark" because they subsequently provide little information to public investors. This paper addresses the going-dark phenomenon and its implications for the debate over mandatory disclosure. Mandatory disclosure's critics contend that insiders of publicly traded firms will always voluntarily provide adequate information to investors. The disclosure choices of gone-dark firms raise doubts about this claim. The paper also puts forward a new approach to regulating going-dark firms: giving public shareholders a veto right over exits from mandatory disclosure. Such an approach, it shows, will prevent undesirable exits from mandatory disclosure while preserving firms' ability to engage in value-increasing exits.