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Senators Introduce Bill That Eases IPO Regulations

rhizome 15y ago
Ah, lowering the barrier to entry to the stock market. Can't think of any way this could go wrong.
MichaelApproved 15y ago
It doesn't seem like a major barrier to IPO. As an investor, I'd rather the company spend the extra money to fully comply with regulations.
- russell 15y ago
  The costs of an IPO and the costs of complying with Sarbanes Oxley are so high that no company with revenue less than $100m can afford to go public. I would like to see changes so that smaller companies can afford to go public.
  - MichaelApproved 15y ago
    Isn't it easier for a company < 100m to get money from private investors?
    - rhizome 15y ago
      Sure, but private investors might cut your thumbs off if you skive.
      - MichaelApproved 15y ago
        Shouldn't any investor do that?
    - russell 15y ago
      Not necessarily. The amount needed could be too large for angels or might not meet the requirements of VCs. It might be too risky or it might be a nice solid company without high growth prospects. The problem with private capital is that there has to be an exit strategy, acquisition or IPO. If IPO is closed off because of cost, private capital may be closed off for the same reason. I would like to see less restrictive regulation in this area, not for ideological reasons, but because denies small, but promising, companies access to public markets. Regulation is still needed to keep out fraud, but I dont think is should attempt to deny risk.
      - MichaelApproved 15y ago
        If private equity doesn't see value (because of limited growth or too much risk) why would the public markets see it differently? I see your point about exits but there are enough private equity companies that are OK with holding companies indefinitely so long as the company is viable. The biggest reason to worry about an exit is liquidity and fear of being the last sucker to invest. Liquidity can be addressed by going in the private market and fear of being the last sucker can be addressed by not buying the company in the first place.
randall 15y ago
Are small IPOs good for companies? That's a question that's honestly on my mind. My gut reaction is like "anyone who wants to go public w/o this kind of scrutiny shouldn't," but that's completely from a non-informed place. Anyone have any strong opinions about the value of small cap companies on the NYSE / NASDAQ?
- MichaelApproved 15y ago
  It's important for smaller companies to have access to the market so they can raise capital and compensate employees with stock options. Could make it a stronger company without needing to change the business model or grow the company.
  - rhizome 15y ago
    1. They don't have a right to a market 2. There's already a market available to them: the internet 3. Smaller companies already can and do satisfy the regs. 4. Why shouldn't they have/want to change an nonviable business model? 5. What about risk?
    - MichaelApproved 15y ago
      Let me clarify: I'm not in favor of lowering the regulatory requirements for companies, big or small. It's important to help them access the market but not at the expense of less regulation.
    - russell 15y ago
      I dont think you understand the issues. The article and the other posters are talking about the ability of a small company to issue publicly traded shares via an IPO. 2. The internet is not a capital market. If you try to issues shares in the US or to make a market in them you will quickly be visited by the SEC. 3. No. I worked for a $35m revenue company a few years ago which wanted to go public. The cost of preparing for the offering would have been in excess of $3 million. That pretty much eliminates IPOs for small companies. 4. ??? Once a company goes public, it is subject to the costs of Sarbanes-Oxley which entails costs of $3 million and up per year. Sure, simplification of the IPO process for smaller companies entails more risk, but the trade off is a more vigorous startup arena. I once did some back of the envelope calculations that convinced me that the yearly cost of SQ exceeds all the losses from Enron.

Ah, lowering the barrier to entry to the stock market. Can't think of any way this could go wrong.

It doesn't seem like a major barrier to IPO. As an investor, I'd rather the company spend the extra money to fully comply with regulations.

russell 15y ago
The costs of an IPO and the costs of complying with Sarbanes Oxley are so high that no company with revenue less than $100m can afford to go public. I would like to see changes so that smaller companies can afford to go public.
- MichaelApproved 15y ago
  Isn't it easier for a company < 100m to get money from private investors?
  - rhizome 15y ago
    Sure, but private investors might cut your thumbs off if you skive.
    - MichaelApproved 15y ago
      Shouldn't any investor do that?
  - russell 15y ago
    Not necessarily. The amount needed could be too large for angels or might not meet the requirements of VCs. It might be too risky or it might be a nice solid company without high growth prospects. The problem with private capital is that there has to be an exit strategy, acquisition or IPO. If IPO is closed off because of cost, private capital may be closed off for the same reason. I would like to see less restrictive regulation in this area, not for ideological reasons, but because denies small, but promising, companies access to public markets. Regulation is still needed to keep out fraud, but I dont think is should attempt to deny risk.
    - MichaelApproved 15y ago
      If private equity doesn't see value (because of limited growth or too much risk) why would the public markets see it differently? I see your point about exits but there are enough private equity companies that are OK with holding companies indefinitely so long as the company is viable. The biggest reason to worry about an exit is liquidity and fear of being the last sucker to invest. Liquidity can be addressed by going in the private market and fear of being the last sucker can be addressed by not buying the company in the first place.

randall 15y ago

Are small IPOs good for companies? That's a question that's honestly on my mind. My gut reaction is like "anyone who wants to go public w/o this kind of scrutiny shouldn't," but that's completely from a non-informed place. Anyone have any strong opinions about the value of small cap companies on the NYSE / NASDAQ?

MichaelApproved 15y ago
It's important for smaller companies to have access to the market so they can raise capital and compensate employees with stock options. Could make it a stronger company without needing to change the business model or grow the company.
- rhizome 15y ago
  1. They don't have a right to a market 2. There's already a market available to them: the internet 3. Smaller companies already can and do satisfy the regs. 4. Why shouldn't they have/want to change an nonviable business model? 5. What about risk?
  - MichaelApproved 15y ago
    Let me clarify: I'm not in favor of lowering the regulatory requirements for companies, big or small. It's important to help them access the market but not at the expense of less regulation.
  - russell 15y ago
    I dont think you understand the issues. The article and the other posters are talking about the ability of a small company to issue publicly traded shares via an IPO. 2. The internet is not a capital market. If you try to issues shares in the US or to make a market in them you will quickly be visited by the SEC. 3. No. I worked for a $35m revenue company a few years ago which wanted to go public. The cost of preparing for the offering would have been in excess of $3 million. That pretty much eliminates IPOs for small companies. 4. ??? Once a company goes public, it is subject to the costs of Sarbanes-Oxley which entails costs of $3 million and up per year. Sure, simplification of the IPO process for smaller companies entails more risk, but the trade off is a more vigorous startup arena. I once did some back of the envelope calculations that convinced me that the yearly cost of SQ exceeds all the losses from Enron.