liquidity

Jury still out on Sarbanes-Oxley and IPOs

Jim Kim — Wed, 13 Aug 2008 17:55:54 -0400

A San Jose Mercury News columnist notes that Sarbanes-Oxley has turned 6 and laments that he hasn't received a single invitation. Well, there were few parties in Silicon Valley, where Sarbox is still blamed for all manner of evil. But the columnist suggests--rightly in my opinion--that small companies that find a way to deal with the law will be better off down the road. Rackspace Hosting managed to go public. The San Antonio company attributed about $4.7 million of its $331 million in 2007 expenses to compliance with Sarbox. The hope is that the liquidity and gains in investor confidence will exceeds the costs. I have a sense that when the market and economy pick up again, we'll be seeing a lot more offerings. There's no reason why small companies can't find the same ROI that compliant big companies have.

For more:
- here's the column

How much has Sarbanes-Oxley hurt start-ups?

Jim Kim — Thu, 03 Jul 2008 09:29:49 -0400

You've likely heard the news by now: In the second quarter, for the first time in 30 years, there were no venture capital-backed companies that went public. Zero! According to the report from the National Venture Capital Association, nearly 60 percent of investors surveyed blamed Sarbanes-Oxley. The burdens the law imposes on newly public companies are certainly real. But Sarbox has long been a convenient scapegoat. There are a host of other issues for VC-backed companies, notably the state of the economy and the state of Wall Street. Right now, the liquidity just isn't there. If you're a start-up, you're likely better off waiting for a more opportune window--or a corporate buyer (not that they're plentiful right now). In general, the VC industry is struggling a bit. Sarbox plays a role, but not the only role.

For more:
- here's an article about the IPO drought from the Washington Post

Templates for internal controls

Tue, 01 Apr 2008 07:59:58 -0400

Chances are your don't have a controller at your firm. Some of you don't have a CFO or dedicated compliance exec. But you do have some internal control issues. So how do you get started? In such situations, templates are not a bad idea. Bizmanualz, of St. Louis, has just released a product aimed at getting companies up to speed quickly when it comes to compliance. It offers a range of templates, editable processes that cover everything from risk management to audits to liquidity, and more. Something to think about. Release

Sarbox battle erupts over retailer

Tue, 15 Jan 2008 06:59:59 -0500

We've been debating the costs vs. benefits of Sarbox for a while now. Has the conventional wisdom shifted at all? Despite acknowledging the costs of Sarbox, deep down, people will always see a move to the Pink Sheets as a red flag. Consider retailer Syms. Its stock tanked in December when it announced it would delist from the NYSE. It said it could save $750,000 a year by avoiding Sarbanes Oxley. That's a big savings for a small firm. But shareholders took issue with the move. To them, the company has given up liquidity and gutted the stock, which outweighs the cost savings. The moral here is that a desire to avoid Sarbox, while understandable, will lead to questions. Perhaps more so now than just a few years ago. Unfortunately, going private may be more difficult these days.

For more:
- here's an article from NJ.com

IPO window opens for tech companies

Tue, 08 Jan 2008 06:59:59 -0500

The old saw in Silicon Valley is that Sarbanes-Oxley has made the public offering less attractive as an exit option. But that seems to be changing. The New York Times notes data from the National Venture Capital Association and Thomson Financial showing 27 offerings of venture-backed companies in the last three months. That rekindles memories of the heady days of the late 1990s. So what's up? The industry seems to have adjusted to Sarbox. The costs are not trivial but must be weighed against the liquidity gains, which once again are starting to look really good. Deep down, many prefer an IPO to a corporate sale.

For more:
- here's the New York Times article

China and Sarbanes-Oxley

Tue, 14 Aug 2007 06:59:59 -0400

We've noted before that there seems to be cultural differences when it comes to Sarbanes-Oxley. Europeans tended to have more negative views, while Asian companies tended to be more positive. That seems to be playing out in the exchange listing business. Eleven Chinese companies have listed on Nasdaq this year, more than in all of 2006. The country could soon become the largest foreign source of listings, overtaking the current leaders, Israel and Canada. Meanwhile, more European companies continue to list. It may be that Chinese companies are still searching for a certain legitimacy that a U.S. listing offers. For them, the costs of Sarbox are worth the added visibility. Now, if the liquidity they expect doesn't materialize, they could change their minds in a few years.

For more:
- here's an AP update

Big Japan bank likes Sarbox

Mon, 13 Nov 2006 19:01:39 -0500

This is sweet music to the New York Stock Exchange: Mizuho Financial Group, Japan's second largest, debuted on the Big Board last week. It follows in the footsteps of Mitsubishi Bank. Surely, the NYSE would like more. A lot has been made of the cultural differences in the world's response to Sarbox. Asian firms were said to be a bit more inclined to see the upside of the law. Indeed, Mizuho is seeking more liquidity and it thinks that its adherence to Sarbox will pay for itself, so to speak. Sadly, not a lot of other companies have moved in the same direction. And for now anyway, Sarbox still ranks as a negative in terms of new business development. We'll have to see how the international aspects fare over the next few months. There could be some significant relief coming.

For more on the ADR:
- read this update

Interesting case study: Chinese firms flock to Nasdaq

Mon, 25 Sep 2006 20:01:39 -0400

The conventional wisdom, which the NYSE and Nasdaq are happy to trumpet, is that Sarbanes Oxley is hampering the efforts of U.S. exchanges to market to foreign companies. The numbers seem to suggest that IPOs in the U.S. have declined as IPOs on the LSE's AIM have risen. So how do you explain the flocking of Chinese companies to the Nasdaq? China now ranks behind only Israel and Canada for foreign listings, and most expect the growth to continue. This is despite Sarbox. The reason seems to be that, for now anyway, Chinese executives have decided the regulatory hassles are outweighed by the added trust, liquidity and cachet of a U.S. listing. Some have suggested that compliance is less onerous for small companies who face fewer changes when instituting compliance processes. In any case, this response seems a bit different from the standard European response.

For more on China IPOs:
- Here's an AP article via the Taipei Times

London seizes on Sarbox as marketing tool

Mon, 11 Sep 2006 20:01:39 -0400

The city of London is in something of an economic development frenzy, and its financial marketing campaign has been built largely on Sarbanes Oxley. While it seems odd, it is a powerful theme that may have legs. London officials have opened an office in New York with the goal of luring more companies to its exchanges. This plays to the anti-Sarbox crowd and certainly has given Congress something to think about. Of course, there are other issues that make a London listing less attractive, so the focus on Sarbox in some ways diverts attention from the issue of fees, service, aftermarket liquidity, etc. The staying power of this issue has been surprising.

For more on London's plans:
- Here's an article from the New York Sun

Avoiding Sarbox: worth the reputation hit?

Mon, 26 Jun 2006 20:01:36 -0400

We've noted the London's Stock Exchange's AIM (Alternative Investment Market), whose rising popularity seems to be at the expense of the NASDAQ. By one measure, raising $50 million on NASDAQ costs roughly $5 million, thanks in part to Sarbox. Raising the same amount via AIM would cost about $3.5 million. Still, there are after-market concerns to be weighed. Quality is certainly an issue. It's fair to say that if AIM goes too far in its bid to attract companies, it runs the risk of developing an almost Pink Sheets sort of reputation. Depth of trading and liquidity must also be factored in. So, the calculus is really complex.

> Here's an article from The Daily Telegraph.
> Not even AIM, however, is immune to the economy. Article
> Speaking of the Pink Sheets, does it stand to get a boost from more companies choosing to delist? One company's story.

PLUS: This is a theme we hit often: the relative unattractiveness of the U.S.
capital markets in the eyes of foreign firms. The latest news on the subject is that the Bank of China says it will not list here, in part due to Sarbox concerns. Article