September 16, 2005
The Facts on New Listings and De-Listings on US Public Markets
More companies are delisting AND more companies are doing new listings. So this would make one think that new companies understand the requirements of Sarbanes-Oxley and still decided to do an IPO. Perhaps those companies who are choosing to delist should be private. This is a very deliberate decision now.
All in all, good governance is the right way to go. Being private is the right decision for some companies who do not really benefit from public markets. Being public is a contract with the public and requires higher standards. Companies can choose what standards are right for them and the public gains because it has a clearer set of guidelines on how companies are run.
An excerpt from an article, here:
"What Does Sarbanes-Oxley Mean for Companies That Want to Go Public?
Added costs may keep smaller businesses away.
From: Inc. Magazine, September 2005 Page 138 By: Amy Feldman
Conventional wisdom has it that Sarbanes-Oxley is preventing companies from going public. While that hasn't been proved--Nasdaq will have more IPOs this year than last year if the trend holds--the regulations have clearly made it more expensive to go public and stay public.
Because public companies need to comply with Sarbanes-Oxley, including the costly rules on internal controls, a company planning an IPO needs to have a cash hoard set aside in advance. It will face higher audit costs, higher insurance costs, and more regulatory-related duties for its staffers.
The added costs of Sarbanes-Oxley are one reason, among many, that IPO-ready companies are now larger and more established than they used to be. Jim McGeaver, chief financial officer of business software company NetSuite, which is based in San Mateo, Calif., notes that 10 years ago when he worked at Photon Dynamics, that company had no trouble going public with $20 million in revenue. "Now that has to be in the $50 million to $75 million range for the investment bankers to even look at you," McGeaver says. "It is just going to mean that companies will go public later in the cycles."
Staying public is tougher and costlier for precisely the same reasons. The new costs are pushing some companies to go private and others to delist. Any company with fewer than 300 shareholders can delist by simply filing Form 15 with the Securities and Exchange Commission....
All told, a record 198 companies delisted in 2003, the first full year after the passage of Sarbanes-Oxley, and another 134 did so in 2004, according to a study by Christian Leuz, a professor of accounting at the University of Pennsylvania's Wharton School. That compares with just 67 that jumped in 2002 and 43 in 2001. Another study by law firm Foley Lardner found that 21% of public companies have considered going private or selling out as a result of the act. "
For the complete article, click here.
All in all, good governance is the right way to go. Being private is the right decision for some companies who do not really benefit from public markets. Being public is a contract with the public and requires higher standards. Companies can choose what standards are right for them and the public gains because it has a clearer set of guidelines on how companies are run.
An excerpt from an article, here:
"What Does Sarbanes-Oxley Mean for Companies That Want to Go Public?
Added costs may keep smaller businesses away.
From: Inc. Magazine, September 2005 Page 138 By: Amy Feldman
Conventional wisdom has it that Sarbanes-Oxley is preventing companies from going public. While that hasn't been proved--Nasdaq will have more IPOs this year than last year if the trend holds--the regulations have clearly made it more expensive to go public and stay public.
Because public companies need to comply with Sarbanes-Oxley, including the costly rules on internal controls, a company planning an IPO needs to have a cash hoard set aside in advance. It will face higher audit costs, higher insurance costs, and more regulatory-related duties for its staffers.
The added costs of Sarbanes-Oxley are one reason, among many, that IPO-ready companies are now larger and more established than they used to be. Jim McGeaver, chief financial officer of business software company NetSuite, which is based in San Mateo, Calif., notes that 10 years ago when he worked at Photon Dynamics, that company had no trouble going public with $20 million in revenue. "Now that has to be in the $50 million to $75 million range for the investment bankers to even look at you," McGeaver says. "It is just going to mean that companies will go public later in the cycles."
Staying public is tougher and costlier for precisely the same reasons. The new costs are pushing some companies to go private and others to delist. Any company with fewer than 300 shareholders can delist by simply filing Form 15 with the Securities and Exchange Commission....
All told, a record 198 companies delisted in 2003, the first full year after the passage of Sarbanes-Oxley, and another 134 did so in 2004, according to a study by Christian Leuz, a professor of accounting at the University of Pennsylvania's Wharton School. That compares with just 67 that jumped in 2002 and 43 in 2001. Another study by law firm Foley Lardner found that 21% of public companies have considered going private or selling out as a result of the act. "
For the complete article, click here.
