Reality on VC-backed IPOs and Sarbox
A recent study of the IPO market by the National Venture Capital Association contained a list of remedies for the pathetic state of VC-backed offerings. But the list of remedies was surprising for a glaring omission: It didn't mention anything about repealing or reforming Sarbanes-Oxley. The chairman of the NVCA told the San Jose Mercury News: "We decided we were not going to whine about Sarbanes-Oxley." This is a huge step forward and suggests a deeper understanding of what ails the VC-backed IPO market.
We've certainly noted before that there are lots of reasons why a small company might choose to list on AIM as opposed to the Nasdaq, such as high investment banking fees and a poor economy and bear market. The Mercury News offers other reasons, high audit fees in general, a lack of boutique investment banks that thrived in the dot.com era. The fact is that if you want liquidity, you have to seek liquid markets. A lot of companies are sorry they went public via AIM. Meanwhile, a lot of Chinese companies view the U.S. markets and Sarbanes-Oxley as prestigious and worth the costs. My sense is that once the economy picks up, the start-up economy will improve. At that point, Sarbox compliance will be seen as a plus rather than a minus.
- here's the column