I’ve been discussing (e.g., here) the effect of Sarbanes-Oxley in persuading firms to go private. Now there also seems to be an effect in dissuading firms from going public, according to this W$J story. Instead, the companies are opting for financing from private-equity firms, which are helping companies face this “new world of regulatory scrutiny."
The CEO of one company that went this route said “I think staying private versus tackling Sarbanes-Oxley head-on is something a lot of companies think about." The article also notes that Sarbanes-Oxley has “made it harder for small companies to attract outsiders to sit on their boards.” Seems the good directors don’t want to take this risk in the SOX environment.
This is a boon for private equity funds. But since going public is an important venture capital exit strategy, partially closing the exit could impede start-up financing, and therefore make it harder to get ideas off the ground.
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