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What regulations are keeping companies from going public? I ask out of ignorance.

jonknee 16y ago
SOX http://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act http://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act It's not keeping companies from going public as much as being a big enough pain and expense to make methods like Groupon's more desirable.
- revorad 16y ago
  Can someone please summarise SOX in layman's terms?
  - lionheart 16y ago
    In very layman's terms (best I can do right now): 1. Going public now requires months and months more of extra accounting due dilligence, audits, etc. that will cost millions upon millions of dollars. 2. Now that you're a public company most of the executives and especially the CFO are severely, criminally liable for any accounting fraud that happens in the organization regardless of whether they knew anything about it. SOX was a reaction (over-reaction) to the Enron and Worldcom disasters where accounting fraud took down huge public companies, destroyed thousands of jobs, and cost billions of dollars. And the executives just claimed they didn't know anything when they obviously did. So now theres extra audits, execs are liable regardless, and nobody wants to go public anymore.
    - imnotsosure 16y ago
      Has it ever occurred to you that many companies might choose to stay private in part because it offers advantages over an IPO, even ignoring SOX? A few examples: - Better alignment of company and investor - Better prices for company - Less risk if price is rejected by investor means it's easier to maximize value - More control over company fate Honestly, if you gave me equal cost options for private and public investment, I'd lean strongly towards private because of the strategic flexibility it offers. I'd really only look to IPO if the amount of capital I was looking to raise was absolutely enormous and there was reason to believe that diverse ownership was better than having strategically chosen investors, and that's true with or without SOX. The growth of VC and PE means that it's more viable than it used to be, so it happens more often.
- imnotsosure 16y ago
  People love to point the finger at SOX, but compliance for a company Groupon's size is not a dealbreaking expense. I think that many people are choosing to go private because it makes it easier to maximize the price they receive without creating risk that the IPO will fail. After all, a failed IPO is much more expensive and damaging than a private investor who passes the opportunity.
lionheart 16y ago
Sarbanes-Oxley is the biggest one by far. Practically single-handedly killed all IPOs in the United States. Plus nobody wants to IPO in this economy anyway.

SOX http://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act http://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act It's not keeping companies from going public as much as being a big enough pain and expense to make methods like Groupon's more desirable.

revorad 16y ago
Can someone please summarise SOX in layman's terms?
- lionheart 16y ago
  In very layman's terms (best I can do right now): 1. Going public now requires months and months more of extra accounting due dilligence, audits, etc. that will cost millions upon millions of dollars. 2. Now that you're a public company most of the executives and especially the CFO are severely, criminally liable for any accounting fraud that happens in the organization regardless of whether they knew anything about it. SOX was a reaction (over-reaction) to the Enron and Worldcom disasters where accounting fraud took down huge public companies, destroyed thousands of jobs, and cost billions of dollars. And the executives just claimed they didn't know anything when they obviously did. So now theres extra audits, execs are liable regardless, and nobody wants to go public anymore.
  - imnotsosure 16y ago
    Has it ever occurred to you that many companies might choose to stay private in part because it offers advantages over an IPO, even ignoring SOX? A few examples: - Better alignment of company and investor - Better prices for company - Less risk if price is rejected by investor means it's easier to maximize value - More control over company fate Honestly, if you gave me equal cost options for private and public investment, I'd lean strongly towards private because of the strategic flexibility it offers. I'd really only look to IPO if the amount of capital I was looking to raise was absolutely enormous and there was reason to believe that diverse ownership was better than having strategically chosen investors, and that's true with or without SOX. The growth of VC and PE means that it's more viable than it used to be, so it happens more often.
imnotsosure 16y ago
People love to point the finger at SOX, but compliance for a company Groupon's size is not a dealbreaking expense. I think that many people are choosing to go private because it makes it easier to maximize the price they receive without creating risk that the IPO will fail. After all, a failed IPO is much more expensive and damaging than a private investor who passes the opportunity.

lionheart 16y ago

Sarbanes-Oxley is the biggest one by far. Practically single-handedly killed all IPOs in the United States. Plus nobody wants to IPO in this economy anyway.