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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 equatio

by 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.

waterlesscloud 16y ago
You continue to focus on the cost of Sarbox, but what if the real objection is that increased regulatory requirements would slow down a company that famously has a core value of moving very fast?
tptacek 16y ago
Respectfully, I'm pretty sure you need to read up on SOX before you talk so stridently about it. SOX most definitely does increase the costs of going public to a point where it changes the types of companies that do go public. In the '90s, companies went public with little or no revenue. In the 2000s, you can't get anyone to underwrite you until you pass a fairly high 8-figures revenue threshold.
- jbooth 16y ago
  But that's a decision on the part of the person doing the underwriting, right? You're describing psychological factors that have nothing to do with the cost of doing the underwriting. Are you saying SOX tripled the cost? 10X? If not for SOX, are you suggesting that pets.com would have a successful IPO today?
  - tptacek 16y ago
    Yes, if it wasn't for SOX, I think a lot of companies no more sound than PETS.COM would have gone public. They'd have lots of users, moderate and consistent revenue, but no real prospects.
- krschultz 16y ago
  "8-figure revenue" Which Facebook has. So why arent they public? Obviously not the monetary cost of SOX. It could be one of the toher parts of SOX (such as the regulations on public company execs) but I find it hard to believe the cost of the accounting department is the reason Facebook isn't public. There are thousands of companies smaller than Facebook being traded every day and they're not going backrupt because of the accounting costs. Even without SOX, there were a lot of reasons to remain private. On the margins some companies remain private because of SOX costs. (If SOX is preventing useless companies with 0 revenue from going public I see that as a feature and not a bug). But on the scale of Facebook, the costs are not important. So there are other reasons driving this, not SOX.
  - tptacek 16y ago
    You're right; Facebook easily can go public. I think the subtext is, had SOX not happened, it's very likely they would already have gone public. What I'm suggesting happened was, SOX took the IPO mechanism, which was a common and easy path to liquidity for VC, and made it a much bigger deal --- not just because of the regulatory burden that it imposes, but also because it washed out many hundreds of companies that might have gone public instead of taking a C round. Being one of a small number of standard bearers for tech's return to the public markets is a different thing than being one of the best of hundreds of tech companies at varying stages of growth on the market.

by jbooth 16y ago

waterlesscloud 16y ago

You continue to focus on the cost of Sarbox, but what if the real objection is that increased regulatory requirements would slow down a company that famously has a core value of moving very fast?

tptacek 16y ago

Respectfully, I'm pretty sure you need to read up on SOX before you talk so stridently about it. SOX most definitely does increase the costs of going public to a point where it changes the types of companies that do go public. In the '90s, companies went public with little or no revenue. In the 2000s, you can't get anyone to underwrite you until you pass a fairly high 8-figures revenue threshold.

jbooth 16y ago
But that's a decision on the part of the person doing the underwriting, right? You're describing psychological factors that have nothing to do with the cost of doing the underwriting. Are you saying SOX tripled the cost? 10X? If not for SOX, are you suggesting that pets.com would have a successful IPO today?
- tptacek 16y ago
  Yes, if it wasn't for SOX, I think a lot of companies no more sound than PETS.COM would have gone public. They'd have lots of users, moderate and consistent revenue, but no real prospects.
krschultz 16y ago
"8-figure revenue" Which Facebook has. So why arent they public? Obviously not the monetary cost of SOX. It could be one of the toher parts of SOX (such as the regulations on public company execs) but I find it hard to believe the cost of the accounting department is the reason Facebook isn't public. There are thousands of companies smaller than Facebook being traded every day and they're not going backrupt because of the accounting costs. Even without SOX, there were a lot of reasons to remain private. On the margins some companies remain private because of SOX costs. (If SOX is preventing useless companies with 0 revenue from going public I see that as a feature and not a bug). But on the scale of Facebook, the costs are not important. So there are other reasons driving this, not SOX.
- tptacek 16y ago
  You're right; Facebook easily can go public. I think the subtext is, had SOX not happened, it's very likely they would already have gone public. What I'm suggesting happened was, SOX took the IPO mechanism, which was a common and easy path to liquidity for VC, and made it a much bigger deal --- not just because of the regulatory burden that it imposes, but also because it washed out many hundreds of companies that might have gone public instead of taking a C round. Being one of a small number of standard bearers for tech's return to the public markets is a different thing than being one of the best of hundreds of tech companies at varying stages of growth on the market.