Crowdfund Insider covers John Berlau's testimony on Sarbanes-Oxley before the Subcommittee on Capital Markets, Securities, and Investment (Financial Services).
In a hearing in the House of Representatives last week, entitled “The Cost of Being a Public Company in Light of Sarbanes-Oxley and the Federalization of Corporate Governance,” in front of the Sub-committee on Capital Markets, Securities, and Investment (part of the Financial Services Committee), this phenomenon was reviewed. On person presenting, John Berlau from the Competitive Enterprise Institute, testified that smaller investors have simply been cut out from a significant wealth generating option:
“Sarbanes-Oxley is shutting out average investors from the early growth stages of the next Cisco and Starbucks. A few years after SOX was enacted, 80 percent of firms went public with IPOs greater than $50 million, while IPOs greater than $1 billion have become a normal occurrence,” explained Berlau. “Facebook waited to go public until it could launch an IPO of $16 billion. Home Depot went public in 1981, when it had just four stores in the Atlanta area. Co-founder Bernie Marcus has stated repeatedly that he never could have gone public back then had SOX been in place. Home Depot may never have grown into the chain it is today, but even if it had, ordinary investors would not have been able to share in that wealth from that growth.”
Berlau contrasted today with the pre-Sarbox world;
“In the early 1990s, 80 percent of companies launching IPOs—including Starbucks and Cisco Systems—raised less than $50 million each from their offerings. Entrepreneurs were able to get capital from the public to grow their firms, while average American shareholders could grow wealthy with the small and midsize companies in which they invested.”
Read the full article at Crowdfund Insider.