As the cost of compliance mounts, it's only reasonable to assume that many outfits, especially the smaller ones, will avoid it altogether
Is the Sarbanes-Oxley Act of 2002 one of the reasons why an increasing number of companies are opting to go private? When Georgia Pacific (GP ; S&P investment rank, 3 STARS; recent price, $47) CEO Pete Corell attributed his willingness to sell to a private company in part because of what he viewed as onerous regulations like those contained within Sarbanes-Oxley (popularly known as SOX), the news set off market speculation about whether other public companies would follow suit.
How real is this threat? And what does it mean for investors? Standard & Poor's Chief Economist David Wyss believes SOX is a factor in the recent wave of privatizations, but a relatively minor one. He does, however, think the legislation makes it even harder to be a public company, which creates another incentive for outfits to stay or go private. "Most of the issue is, I think, transitional. Once companies learn to operate in the new environment, it should stabilize," Wyss says.
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