Why Are Financial Printing Expenses So High?

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

Printing Firms Draw Complaints For Murky Billing

• Summary: Did you know that after lawyer and banker fees, financial printing is often companies' highest IPO expense? The financial print market oligopoly, dominated by Merrill Corp. (in registration for IPO), Bowne & Co. (BNE) and R.R. Donnelley & Sons Co ((RRD); currently in negotiations to be acquired by an LBO firm) is accused of murky practices ranging from deliberate confusion to fraud. According to John Wert, a former Bowne salesman who started a financial print auditing company: "Printers often try to purposely confuse issuers. They yank out precise numbers from their final bills." In this non-regulated industry characterized by a complete absence of transparency, audits are frequently met with resistance. One Bowne customer was told, for example, that "For the purposes of document integrity, efficient work flow and the logistics and space issues ... pages are not kept."
• Comment on related stocks/ETFs: Merrill provided an overview of the global business outsourcing industry in its S1 filing from June. A few weeks ago investors were reported to be walking away from RRD due to disagreements on price, however as the WSJ article notes, these companies have done a spectacular job avoiding the limelight.