
Senators Introduce Bill That Eases IPO Regulations - MichaelApproved
http://skimthat.com/article/4520/senators-introduce-bill-that-eases-ipo-regulations
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randall
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?

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MichaelApproved
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.

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rhizome
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?

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russell
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.

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MichaelApproved
_"I once did some back of the envelope calculations that convinced me that the
yearly cost of SQ exceeds all the losses from Enron"_

But without the trust that the regulation adds, there would be the potential
for more Enrons and less people willing to invest in the market.

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MichaelApproved
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.

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russell
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.

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MichaelApproved
Isn't it easier for a company < 100m to get money from private investors?

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russell
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.

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MichaelApproved
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.

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

