Monday, January 24, 2005

The Higher Price of Staying Public

The shares of Fidelity Federal Bancorp have always been thinly traded, and its executives often wondered why it bothered to be a public company at all. Still, they never really considered delisting the stock until Congress passed the Sarbanes-Oxley law, with its myriad new reporting rules, in 2002.

In November, the bank announced that it was "going dark" - delisting its stock from the Nasdaq market. That means it will no longer need to file reports with the Securities and Exchange Commission.

Donald R. Neel, the chief executive of Fidelity, which is based in Evansville, Ind., says the bank's accounting and management would easily pass any scrutiny. But he says going dark will save $300,000 a year, a substantial sum for a bank with just $200 million in assets.

"Sarbanes-Oxley was designed to provide additional corporate transparency and safeguards for the investing public," Mr. Neel said. "Instead, it is prompting companies like ours to become less transparent."

That is not an option for huge companies, of course. Their identities and structures are inextricably linked with their status as publicly listed entities. But the passage of Sarbanes-Oxley, with its requirements that companies report in greater detail not just the numbers, but also their methods for compiling and checking them, has served as a catalyst to make smaller companies rethink the idea of being public.

The Higher Price of Staying Public

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