3 ms·

Eh, putting it on sarbox reminds me of the attempts to blame the mortgage meltdown on Fannie Mae. Way, way too ideologically convenient. I mean, they just pic

by jbooth 16y ago

Eh, putting it on sarbox reminds me of the attempts to blame the mortgage meltdown on Fannie Mae. Way, way too ideologically convenient. I mean, they just picked up 500 mil, I think they could find the resources to do a little extra accounting, even if you're contending that it's an unnecessary burden. Everything that I can see (as an outsider) about FB's corporate DNA tells me what they want to stay private for as long as possible regardless of whether it costs them an extra 100k in accounting to go public. I mean, they just picked up 500 million. I bet they could scratch up the money to bring in Accenture and have them do a bunch of excel sheets once a year. I don't really have any solutions, here, aside from some ill-conceived and emotionally satisfying proclamations of "destroy the IPO underwriting industry!". I'm just noticing that, if things are working the way the article says they are, it seems like Goldman's job in this case is all about creating exclusive deals and making insider connections, and very little of it is about evaluating Facebook's proper worth. Although maybe they think they're making a value investment. Who knows.

yummyfajitas 16y ago
It's well known that Zuckerberg wants to keep secret much of the information that Sarbox (and various other rules affecting public companies) would require him to release. I'm sure Facebook could afford several million/year on Sarbox compliance. But what is the benefit to them? As you said, connected insiders (such as Zuckerberg and Goldman's clients) are doing just fine with Facebook remaining private. So why bother with the hassle of Sarbox, potential minority shareholder lawsuits, and liquid markets that might go down more quickly than the current illiquid one?
- jbooth 16y ago
  Well, my contention was that sarbox is a tiny piece of the puzzle, just to make it clear. Closing a few loopholes and adding a few new costs didn't radically change the game to my mind, compared to the already-huge distinction between public and private. Although you know more about this stuff than I do. I'm certainly not saying that FB is under any obligation to go public if they don't want to. Just that in this particular case, Goldman is primarily trading on them not being public rather than trading on their value. I mean, good for them for exploiting a bug, I guess, but this is why I think the financial industry are, in the large, a bunch of charlatans :)
tptacek 16y ago
Besides trying to pivot to a big-government/little-government argument, what specifically is your objection to Chris' comments? It seems pretty plain on its face that SOX materially increases the cost of going public; not simply because of what compliance requires you to disclose, but because of how it directly increases outside accounting costs. If you want transparency from companies, you have to see them go public. It is not reasonable to demand public-company transparency from a private company. The word "private" means something. If the markets worked today like they did in 1996, do you seriously believe Facebook would be a private company? Why or why not?
- jbooth 16y ago
  I wasn't pivoting, I was pointing out a fallacy. Fannie Mae and Sarbox are tiny, tiny pieces of their respective puzzles. Blowing them up because it's ideologically satisfying is thinking with your amygdala. (BTW, the "big government / little government" argument exists entirely in the heads of the ideologically pure. The rest of us are more concerned with the "works / doesn't work" argument, on a case by case basis.)
  - tptacek 16y ago
    I'm a near-statist liberal, so I'm pretty sure it doesn't just exist in the heads of comic book caricatures. I take your point about making scapegoats of things like SOX, but "unintended consequences" is part of the core narrative of regulation, even minor regulations (SOX isn't minor), and you're really not answering my question with this comment. Do you think more companies should go public? If not, do you think private companies should be forced to be more transparent? Why? If so, do you not believe that it's become more expensive to be a public company in 2010 than it was in 1995?
    - jbooth 16y ago
      I've stated my opinion several times now, and unfortunately it doesn't fit into those questions: Sarbox's additional costs are a very small part of the equation compared to the fundamental difference between public/private, not to mention all of the costs that existed prior to Sarbox. If you're making the decision to go public or stay private, Sarbox is very unlikely to be a deciding factor. Hence, bringing it up is something of a red herring IMO. EDIT: In response to below, I haven't read Sarbox, but I'm pretty sure it has no provisions regarding building a new HBase messaging system or online user privacy.

by jbooth 16y ago

yummyfajitas 16y ago

It's well known that Zuckerberg wants to keep secret much of the information that Sarbox (and various other rules affecting public companies) would require him to release. I'm sure Facebook could afford several million/year on Sarbox compliance. But what is the benefit to them? As you said, connected insiders (such as Zuckerberg and Goldman's clients) are doing just fine with Facebook remaining private. So why bother with the hassle of Sarbox, potential minority shareholder lawsuits, and liquid markets that might go down more quickly than the current illiquid one?

jbooth 16y ago
Well, my contention was that sarbox is a tiny piece of the puzzle, just to make it clear. Closing a few loopholes and adding a few new costs didn't radically change the game to my mind, compared to the already-huge distinction between public and private. Although you know more about this stuff than I do. I'm certainly not saying that FB is under any obligation to go public if they don't want to. Just that in this particular case, Goldman is primarily trading on them not being public rather than trading on their value. I mean, good for them for exploiting a bug, I guess, but this is why I think the financial industry are, in the large, a bunch of charlatans :)

tptacek 16y ago

Besides trying to pivot to a big-government/little-government argument, what specifically is your objection to Chris' comments? It seems pretty plain on its face that SOX materially increases the cost of going public; not simply because of what compliance requires you to disclose, but because of how it directly increases outside accounting costs. If you want transparency from companies, you have to see them go public. It is not reasonable to demand public-company transparency from a private company. The word "private" means something. If the markets worked today like they did in 1996, do you seriously believe Facebook would be a private company? Why or why not?

jbooth 16y ago
I wasn't pivoting, I was pointing out a fallacy. Fannie Mae and Sarbox are tiny, tiny pieces of their respective puzzles. Blowing them up because it's ideologically satisfying is thinking with your amygdala. (BTW, the "big government / little government" argument exists entirely in the heads of the ideologically pure. The rest of us are more concerned with the "works / doesn't work" argument, on a case by case basis.)
- tptacek 16y ago
  I'm a near-statist liberal, so I'm pretty sure it doesn't just exist in the heads of comic book caricatures. I take your point about making scapegoats of things like SOX, but "unintended consequences" is part of the core narrative of regulation, even minor regulations (SOX isn't minor), and you're really not answering my question with this comment. Do you think more companies should go public? If not, do you think private companies should be forced to be more transparent? Why? If so, do you not believe that it's become more expensive to be a public company in 2010 than it was in 1995?
  - jbooth 16y ago
    I've stated my opinion several times now, and unfortunately it doesn't fit into those questions: Sarbox's additional costs are a very small part of the equation compared to the fundamental difference between public/private, not to mention all of the costs that existed prior to Sarbox. If you're making the decision to go public or stay private, Sarbox is very unlikely to be a deciding factor. Hence, bringing it up is something of a red herring IMO. EDIT: In response to below, I haven't read Sarbox, but I'm pretty sure it has no provisions regarding building a new HBase messaging system or online user privacy.