IPO Flight Illustrates Corporate Aversion to Our Markets (Rep. Ed Royce)
Recently, there has been considerable attention focused on the flight of capital from our markets to competing markets overseas – including London, Dubai and Hong Kong.
The fact that only two of the top 20 global Initial Public Offerings (IPOs) went public in the United States last year, compared with nine in 2000 and 12 in 2001, reflects an aversion of our public markets by corporations around the world.
If companies are not marching off to London, they are attempting to avoid the scrutiny faced by public companies through delisting — or transferring ownership to the ever-popular private equity industry. According to a recent study, approximately 200 companies petitioned to delist their stock from the U.S. exchanges in 2003 and in 2004 – compared to just 67 companies in 2002.
The three major studies on U.S. competitiveness released in the past year-focus considerable attention on two major hindrances afflicting our public companies.
The first being the regulatory environment within the United States – most notably Sarbanes-Oxley – and the burdensome requirements it places on such companies.
Former Chairman of the Federal Reserve – Alan Greenspan – noted that most of Sarbanes-Oxley is, “a cost-creator with no benefit, I’m aware of. Regulatory and statutory changes need to be made as well, if we’re going to move forward. I hope it happens before the whole financial system walks off to London.”
The recent studies reference the current problems found in our legal system, as well. Specifically they note the costs, inefficiencies, and uncertainties associated with securities class action lawsuits.