Movin’ on Down: Firms Eye Alternative Listings

Published by Reuters Complinet
June 2009

General Motors did it. Air France expected to save $10 million by doing it. Many smaller firms have done it, too, citing cost savings averaging around $500,000 annually.

Since passage of the Sarbanes-Oxley Act in 2002, a number of companies have chosen to “de-register” and move their stocks to foreign or over-the-counter exchanges. While that number has tailed off over the past couple of years, a new rule scheduled to go into effect in December has companies increasing exploring options beyond SEC registration and the major U.S. trading exchanges.

Public companies with annual revenues of $75 million or more whose fiscal years end after Dec. 15 must become fully SOX-compliant. The deadline was pushed back from last year, but there have been no indications so far that there will not be another extension. The deadline is forcing a large number of firms to explore alternatives, experts say.

“When you amalgamate these costs – Sarbanes, litigation, D&O (directors and officers) insurance – you have to be a fairly sizable company from a market cap perspective to bear those costs,” notes Thomas C. Klein, an attorney with the Silicon Valley-based law firm GreenbergTraurig, where he represents public companies and specializes in venture capital deals, mergers and acquisitions and other transactions.

There have been a lot of recent conversations about alternatives to SEC registration with GreenbergTraurig clients, Klein said. “We’re reaching down into the 90 percent of the companies that are listed and applying the SOX 404 to them, and there’s a cost concern for those that are already public. As for those that are not yet public, every one of them now considers … listing on another exchange.” Continue reading “Movin’ on Down: Firms Eye Alternative Listings”