Small Business Given More Time for Sarbanes-Oxley
One of the motivating factors driving some companies to go private is compliance with Sarbanes-Oxley. The Securities and Exchange Commission voted this past week to extend the amount of time small businesses have to comply with Sarbanes-Oxley rules. According to the Washington Post:
“A small-business advisory group created by the SEC had pushed for a delay in the control rules mandated by the Sarbanes-Oxley Act. Under the plan, public companies with a market capitalization of less than $75 million will have until July 2007 to review their financial controls.”
This decision could slightly impact some of the going private transactions that are currently in process and could slightly reduce the number of future going private transactions that are proposed. The delay may reduce the cost of compliance by lowering the immediate demand for compliance services. This is the second time that an extension has been approved for small business compliance. I believe that the first extension coincided with some of the canceled going private transactions that occurred earlier this year.
Since I have been actively involved in investing in these small companies that are proposing to go private, I have tried to keep track of developments concerning Sarbanes-Oxley. The Sarbanes-Oxley News blog appears to be a good resource to keep track of new regulatory developments.
For those companies that have already filed a prelim proxy, do you think that this vote may make them not proceed?
Or is this development likely to mostly effect those companies that have not begun the process.
Your opinion?
I don’t think that this vote will make many companies that have already filed a preliminary proxy not proceed with going private. However, it could affect a few of them that are borderline, so it is definitely worth watching.
This development could also potentially cause some companies that have not begun the process of going private, but are considering going private, to put off their decision until next year now that they have more time. This could be a positive development for investors in these deals, since it may extend the amount of time that these deals are available.
These deals have been around since the 1930s and maybe before that. The spread is a lot nicer right now, but going privates have been around for a long time.
Stuart
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Harvey Electronics
HRVE – announced that it has withdrawn its recent filing on Schedule 13E-3 and related plans to implement a one-for-ten reverse stock split …
The Company has decided to terminate the Transaction as a result of the SEC’s recent announcement that it has deferred for one year the need to comply with internal control reports required under Section 404 of the Sarbanes-Oxley Act…
http://biz.yahoo.com/pz/050928/86943.html
Mat –
Thanks for the update on Harvey Electronics. I didn’t expect to see any canceled deals so soon after the SEC extension for Sarbanes-Oxley compliance.
I wonder if a company that was just about to do a going private split, put it on hold for up to a year,
and shake out the Arb’s (us)?