By Jeff Bailey
Steven M. Davidoff writes a consistently smart column for the New York Times' DealBook section, and his recent article, centering on the decision of the owners of Manchester United, a British soccer team, to stage an IPO in the U.S., should call into question many of the assumptions floating around about capital markets' competitiveness.
Manchester United chose the U.S, Davidoff tells us, essentially because we've become the so lax in our standards for public stock offerings. He writes:
I'm not kidding. The United States, which has long been criticized for its harsh rules surrounding IPOs, is now the place where foreign companies go to avoid regulation.
Say what you will about the Facebook (FB) and Groupon (GRPN) IPOs, but before and since the offerings, investors have had access to a fair level of disclosure about those companies' results and prospects.
Don't get your hopes up on Manchester United's disclosure. In the U.S., Davidoff informs us:
Manchester United will not need to file quarterly reports, report material events, file proxy statements or disclose extensive compensation information, all of which American companies must do. Under a different S.E.C. rule adopted in 2008, Manchester United also does not need to report financials under the generally accepted accounting principles used in the United States, but can instead rely on international financial reporting standards.
Perhaps you're thinking, Manchester United must be a one-off situation, given all the complaints you've heard from stock exchanges and business groups about unwieldy U.S. securities rules. It seems the rhetoric, faithfully and frequently reported, diverges from reality:
The so-called JOBS Act (Jumpstart Our Business Startups Act) opened loopholes a mile wide. Manchester United, Davidoff writes, dates as a business to 1878, yet is receiving regulatory leeway meant for startups. And its far from alone is spotting soft regulation here:
Even before the JOBS Act, Chinese companies took advantage of new S.E.C. rules and started going public en masse in the United States. While some of the I.P.O.'s have worked out, there are now more than 100 newly public Chinese companies facing accusations of fraud by either investors or regulators.
The U.S. technology industry - source of fabulous startups like Google (GOOG) and Microsoft (MSFT) - benefits from the most dynamic system in the world for financing startups, from angel funds, established VCs, private equity and public offerings. Holding companies to high standards has given U.S. markets, relative to others, an unmatched combination of opportunity for reward and cognizance of risk. Do we really want to turn our markets into some backwater listing service?