Wednesday, October 13, 2004

Fool.com: Nightmare on Sarbanes Street

Ironically, while Sarbanes-Oxley is meant to help shareholders, we are seeing examples of the opposite result. Many small-cap companies, such as Homestore (Nasdaq: HOMS), have been disproportionately affected by the surging compliance costs of Sarbanes-Oxley. It can easily cost in excess of $1 million per year for a small-cap company. Recently, Bill Mann pointed out the problems in Your Ownership Is Revoked.

Another impact: Prospective IPO candidates may stay private. Thus, we may be missing the next Microsoft (Nasdaq: MSFT) or Starbucks (Nasdaq: SBUX).

And another impact: Some public companies may decide to go private. This is not necessarily bad for shareholders, as the going-private transaction is usually at a premium to the current stock price. For example, this was the case with Cox Communications (NYSE: COX).

Fool.com: Nightmare on Sarbanes Street

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