Do High Regulatory Costs Force Public Firms to Go Private?
In a July 28 article titled, “Though Stock Is Publicly Held, Firms Adopt Private Mentality,” the Wall Street Journal wrote, “At a time when tougher corporate-disclosure laws are making life more and more difficult for publicly traded companies, deregistering could become even more attractive. So far this year, the SEC’s database of corporate filings shows that 421 U.S. companies have deregistered — a pace that means last year’s total of 675 likely will be surpassed with ease.” The process of deregistration — where a company either goes private or moves to an exchange like the Pink Sheets that generally has fewer filing requirements — is likely to reduce the quality and quantity of financial and business information available to shareholders. In the wake of disclosure-focused regulation and legislation, including the SEC Eligibility Rule and the Sarbanes-Oxley Act, the Journal’s readers might well have scratched their heads and asked, “What’s going on? Are we moving forwards or backward
