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Private Equity Firm To Go Public On Private Exchange
from the mind-bender dept
Whether it's shareholder lawsuits, political interference or Sarbanes-Oxley, there are plenty of reasons for companies to want to avoid the public markets these days. Still, public markets represent a good way to both raise money and give a company's principals liquidity. Private equity firm Apollo Management has announced that it will sell its shares on a private stock exchange established and managed by Goldman Sachs. The exchange is only open to institutional investors, which will allow Apollo to avoid unwanted regulatory scrutiny, while generally relieving it of many other burdens that face public companies. While Apollo will still have to communicate information with investors, it should have a lot more flexibility than the current public system allows for. If Goldman Sachs' exchange can garner a critical mass of listed companies and institutional traders, it, and others like it, should represent an interesting alternative to traditional markets.
Reader Comments
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What's In It For The Investors?
So companies offering shares on this exchange will have less of a compliance burden than those on public exchanges. That means that investors buying shares on this exchange will have less information available to them than on public exchanges. So why are they going to be attracted to a system that seems to disadvantage them?
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Re: What's In It For The Investors?
They get the advantage of higher profits due to lower compliance costs. Yes there is an increased capital risk. But many of the institutional investors are willing to take that burden.
Not only that but the investors don't have to worry about making "mum & dad" investors happy. They can make/encourage the company to tie deals to things that could be mutually advantageous which isn't possible if you have to answer to thousands of other investors.
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Re: Re: Compliance Costs
Thats a lot of hooey! Compliance costs do not reduce profits THAT much.
Institutional investors are willing to take that risk because it is other people's money.
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And the cycle begins anew...
the reason why there's such a regulatory burden is that it's a proven fact that companies won't disclose unhappy news unless they're forced to - and C-level officers will in fact lie through their teeth to get big fat bonuses and paychecks.
Investors go along with this because only-good-news investments make them feel warm and fuzzy inside.
Until it all goes Enron, and then these fskers will be screaming for the govt. to bail them out again.
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SEC
The compliance issues would only get around listing and trading practices set forth by the exchange boards (NYSE, CBT, NASDAQ, etc). If they are based in the US they all have to still abide by SEC regulation, and if they want to allow the public/brokers/investment firms to trade on them they still have to obey the six big investment acts. Earnings filings, SOX logging, fraud, etc are enforced by the government.
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