Ernst and Young‘s global survey released today indicated that despite popular press and political dancing (Paulson Interim Report, Bloomberg/Schumer Report) the U.S. IS, in fact, competitive. This is despite the existence of a strongly regulated market, and one where SOX, at full strength, did not, apparently, hurt the US. market prospects. The study showed that the U.S. generated the largest number of IPOs in 2006, and raised $34.1 billion dollars.
In addition to a stellar 2006, 2007 is working up to be another blockbuster year with the first quarter opening strongly. Plus massive private-equity IPOs (Blackstone, Carlyle, etc…) can only bolster the market as a whole new type of financial industry comes online.
“The fourth quarter of 2006 was the busiest for IPO activity by U.S. companies since 1999, raising $12.4 billion in 72 IPOs,” said Maria Pinelli, Americas Strategic Growth Markets Leader at Ernst & Young LLP. “In 2007, U.S.-based company activity continues to feed into the U.S. stock markets, which also attract key international IPOs, particularly in knowledge-driven sectors like technology and healthcare. Deal sizes are larger than ever and private equity is backing many of them.”
E&Y has some great additional details regarding the study, and I encourage everyone to review the data. The importance of this information is it represents a quantifiable demonstration of the impacts from a heavily regulated financial market and the preference of companies to “go public”.
The past several months have seen massive debate regarding regulations such as SOX, and their negative impacts. These papers, while supported by well researched financial data, are not consistent with the market performance and entrance of companies into the public markets. A simple search via Google news will present the volumes of debate regarding SOX and competitiveness in the U.S.
The takeaway – Companies are going public in the U.S. with a heavily regulated environment. The U.S. markets may be more expensive to operate within as a company, but the upside from massive amounts of equity and a more transparent operational norm appears to be better for everyone. This conclusion has also been supported by several academic studies recently highlighted at the WSJ.
A tangent from internal controls, but highly valuable as the question of regulation and controls comes under fire.