Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. In this episode, Matt Kelly and I take a deep dive back into the issue of the decline in Initial Public Offerings (IPOs). We consider legislation in the House of Representatives to gut the compliance requirements of Dodd-Frank and SOX, all in the name of increasing the number of IPOs.

We review the testimony of Columbia Law School Professor John Coffee before a Congressional committee about these latest initiatives. His testimony is reported by Kevin LaCroix in his most excellent blog, the D&O Diary. Professor Coffee’s testimony  reflects his skepticism that further deregulation alone will result in increased numbers of IPOs. He relates several reasons for the worldwide drop in IPOs, which have nothing to do with Dodd-Frank, SOX or any other US law as they are structural and baked into the global financial system. He also notes that small companies which do go IPO usually have much worse financial performance than companies which seek funding through private equity.

Professor Coffee’s testimony clearly demolishes the myth that Dodd-Frank was a job killer bill or that SOX’s Sec. 404 and 302 requirements have lessened the number of IPOs. There are a wide variety of factors, none of which has been addressed in the House legislative initiatives.