To the People

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or TO THE PEOPLE.

Sunday, October 08, 2006

Sox Destroys US Wealth

Sarbanes-Oxley might be the most horrible legislation ever passed by Congress. And that is saying something. Sox was passed by a Congress that was reacting to the Enron and Worldcom scandals, and a rule of thumb is that when Congress is in reaction mode, a la the Patriot Act, the legislation will be bad.

Let me point out that Bernie Ebbers and Ken Lay were convicted on existing pre-Sox laws.

Sox has destroyed the IPO market in the US, as the regulatory and cost burdens are more than most companies can bear. More US companies are going public on the UK exchange than they are doing on the NASDAQ. Thank you Congress, you are so very smart.

The chill of the IPO market has trickled down to destroy value of private companies, as almost none of them will be able to go public in the Sox environment. A veteran vc fund thinks the environment is so bad that they returned money as they don't think they can spend it anymore and make a decent return. Venture capital is a leading indicator, btw.
The traditional venture model seems to us to be broken,” Steve Dow, a general partner at Sevin Rosen Funds, said in an interview.

In its letter, it bemoaned what it described as “a terribly weak exit environment,” a reference to the dearth of initial public offerings and to a market for acquisitions at valuations that it considers too low to deliver the kind of returns that venture investors expect.