Flight Capitol
June 26, 2007 | Filed Under Litigation, International, Regulation
The attraction of an NYSE listing may be under increasing pressure, according ($sub req’d) to the Financial Times.
Concerns about litigation are cited in a new survey that points to a rise in the international nature of capital markets. London and Hong Kong are cited as growing at the expense of the NYSE:
Nearly 60 per cent of respondents to the survey of attorneys specialising in initial public offerings said the risk of securities litigation, coupled with the cost of developing infrastructure for a public company and meeting accounting standards, discouraged companies from going public in the US, according to Gavin Anderson, the US financial communications company. Richard Truesdell, of Davis Polk and Wardwell, said that, while US exchanges continued to capture a strong share of international offerings, their position was at risk.
“Overseas markets have developed attractive regulatory frameworks and they are getting better at marketing and providing liquidity to support IPOs,” he said.
The Gavin Anderson firm interviewed attorneys from 20 US firms representing issuers on almost $11 billion of US IPOs last year.
While it is true that law firms can benefit from the work created by increased regulation (like Sarbanes-Oxley), this survey shows that long-term it may be more of a mixed blessing if more securities work is headed offshore.
The NYSE, of course, is not sitting still, the parent company is now called NYSE Euronext.
Private Equity and Regulation
April 9, 2007 | Filed Under Private Equity, Regulation
All big gifts come with some strings attached.
Late last week, TXU Energy was forced to disavow a regulatory filing due to objections from private equity buyers Kohlberg Kravis Roberts and Texas Pacific.
TXU gained notoriety this year when the largest-ever private equity buyout ($32 billion plus) was announced. Recently, TXU received a notice from the Texas Public Utility Commission of a proposed a $210 million penalty over allegations of manipulation of wholesale power prices in the summer of 2005.
The company made a filing last week objecting to the penalty that contained a statement that was interpreted that TXU might shut down some power plants if the penalty is upheld. KKR and Texas Pacific were not amused, said they had not been consulted about the filing and disagreed with it (their statement is here).
TXU CEO John Wilder acknowledged that the situation had been mishandled, although TXU denies any actual intent to shut down power plants.
If you had heard that a problem developed between a private equity buyer and a large regulated business, you’d think that the financiers were pushing too hard and were unsophisticated in the nuance of the utility business.
And in this case you’d be wrong. Not only do KKR and Texas Pacific apparently “get it,” they also took the lead when the deal was announced to agree to build fewer new coal plants, gaining support from environmental groups. The closing of the firms’ statement reads:
“We don’t own the company. The more quickly this transaction can be completed, the sooner that TXU can set a different course and a new direction, one that encourages open and productive dialogue with regulators, elected officials and other stakeholders.”
The very least that the promise of $32 billion should get you is a look at a draft of a regulatory filing…
SarbOx, Buffett-Style
March 14, 2007 | Filed Under Regulation, Governance
At yesterday’s Capital Markets Competitiveness conference hosted by U.S. Treasury Secretary Henry Paulson, there was a chance for many to speak, including the Oracle from Omaha.
The Toronto Star summarized some of the proceedings, including these remarks from Warren Buffett:
Buffett, one of the world’s richest men, said corporate America did not shine during the 1990s and is now working through the regulatory crackdown that followed. “It has no choice but to digest what’s being served up.” One result is that managers and directors are increasingly consumed by regulatory process, said Buffett, who is chairman of Berkshire Hathaway Inc.
“We are doing a lot of things that I regard as unnecessary,” he said. “It has changed the complexion of things that go on in our boardroom … Hours and hours get spent on process.
“The process that’s gone through detracts from more important issues that a board should be looking at.”
One benefit of being an oracle is that you can say what many people are thinking. Here’s the full panel that included Mr. Buffett:
Framing the Issues: Markets Perspectives
Moderators:
Treasury Secretary Henry Paulson
SEC Chairman Christopher CoxPanelists:
Warren E. Buffett, Berkshire Hathaway
James Dimon, JPMorgan Chase & Co
Jeffrey R. Immelt, General Electric
Charles R. Schwab, Charles Schwab Corp
John A. Thain, NYSE Group
Ann Yerger, Council of Institutional Investors
Sun’s GC on Reg FD and the SEC
December 18, 2006 | Filed Under Technology, Regulation
Sun general counsel Mike Dillon extends his leadership position on the web and corporate disclosure in Business Week online.
Mr. Dillon, working with Sun’s CEO-blogger Jonathan Schwartz, were first-movers behind an attempt to again more flexibility under Reg FD from the SEC for corporate disclosures via the web. In his words,
As Sun’s general counsel and corporate secretary, I strongly support this view—and beyond just executive blogging and investor transparency. Openness and transparency are critical to conducting business in today’s global marketplace. Markets are conversations. Openness and authenticity are vital factors in the sales cycle and in bringing products to market.
Mr. Dillon’s original post on the subject is here, and Mr. Schwartz’s is here (which has the original letter to SEC Chairman Cox).
More CEO and GC bloggers will help; a tip of the Wired GC cap to Sun. And this site could handle increased readership if I could get a beta version of one of these things in my backyard:
Some SarbOx Sanity?
December 11, 2006 | Filed Under Regulation, In the News
First, the picture that’s worth a thousand words:
SEC chairman Christopher Cox is taking a first step to rationalize Sarbanes Oxley for smaller companies. The New York Times
reports that the chairman will proposed revised standards later this week. Not a total exemption for these companies, but one that might lower some of the costs of compliance.
The proposal will, for the first time, impose a “materiality standard” — that is, auditors will be advised to scrutinize only those controls that could have a reasonable risk of having a material impact on the financial statements. It is expected to encourage auditors to rely on prior years’ work as a basis for testing controls and discourage auditors from multiple testing of the same controls. And it will encourage the auditors to use a “risk assessment” to focus the audit on the areas of greatest potential concern.
Commission officials said last week that the proposal would not be an unequivocal victory for smaller companies because it would not give them what they wanted most: a blanket exemption from Section 404. Nor would it impose a sharp restriction that would limit the auditors to looking at the design of the financial controls.
It will be interesting to see how this develops and how Chairman Cox works with the new Democratic majority. SarbOx namesake Sen. Paul Sarbanes is retiring; no word on what he thinks about changes to his signature piece of legislation.
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