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Daily Archives: November 16, 2010

Why New Growth Companies Aren't Going Public And Unrecognized Risks Of Future Market Disruptions

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Choking the Recovery: Why New Growth Companies Aren’t Going Public And Unrecognized Risks Of Future Market Disruptions – Harold Bradley and Robert E. Litan, Nov. 12, 2010 [The authors are Chief Investment Officer and Vice President for Research and Policy, respectively, at the Ewing Marion Kauffman Foundation]

  • “A strong, sustained recovery will require the formation and growth of new scale companies. These companies, in turn, often require access to equity capital as they grow. Traditionally, this has best been accomplished by the floating of shares in an initial public offering (IPO). IPOs have been down substantially over the past decade. Many factors have been alleged to have contributed to this trend, among them, the higher regulatory cost of going and remaining public under the Sarbanes-Oxley Act (SOX) of 2002. But a far more important, and heretofore unrecognized, deterrent to growth company IPOs is the proliferation of new indexed securities derivatives essentially. Initially, these products took the form of mutual funds; now they are increasingly represented as “exchange traded funds” or ETFs. We show here that ETFs are radically changing the markets, to the point where they, and not the trading of the underlying securities, are effectively setting the prices of stocks of smaller capitalization companies, or the potential new growth companies of the future. In the process, ETFs that once were an important low-cost way for investors to assemble diversified stock holdings are now undermining the traditional price discovery role of exchanges and, in turn, when combined with the high Sarbanes Oxley compliance costs for small companies are discouraging new companies from wanting to be listed on U.S. exchanges.”
  • Related postings on the financial system

    • Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation

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    “The Congressional Oversight Panel’s November oversight report, Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation, reviews allegations that companies servicing $6.4 trillion in American mortgages may in some cases have bypassed legally required steps to foreclose on a home. The implications of these irregularities remain unclear, but it is possible that… Continue Reading

    USTR Report – Small and Medium- Sized Enterprises: Characteristics and Performance

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    “Today the U.S. International Trade Commission (USITC) released a new report requested by United States Trade Representative Ron Kirk. The report, Small and Medium-Sized Enterprises: Characteristics and Performance, shows that by exporting indirectly through wholesalers and as producers of intermediate inputs, U.S. small- and medium-sized enterprises (SMEs) play a larger role in the export economy… Continue Reading

    Federal Reserve: Industrial production and Capacity Utilization

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    Federal Reserve Statistical Release G.17 (419): “Industrial production was unchanged in October after having fallen 0.2 percent in September. For the manufacturing sector, output gained 0.5 percent in October after having risen 0.1 percent in September. Factory production in September was initially reported to have decreased 0.2 percent, but incoming data on steel, fabricated metal… Continue Reading

    Report – U.S. Lags in Reducing Traffic Fatalities and Injuries

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    News release: “The United States is missing significant opportunities to reduce traffic fatalities and injuries, and could save lives by implementing a more rigorous, comprehensive program that adopts successful safety practices from other countries, says a new report by the National Research Council – Achieving Traffic Safety Goals in the United States: Lessons from Other… Continue Reading

    New GAO Reports: Navy's Public Shipyards, DOD Personnel Clearances, Health Care Delivery

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    Defense Infrastructure: Actions Needed to Improve the Navy’s Processes for Managing Public Shipyards’ Restoration and Modernization Needs, GAO-11-7, November 16, 2010 DOD Personnel Clearances: Preliminary Observations on DOD’s Progress on Addressing Timeliness and Quality Issues, GAO-11-185T, November 16, 2010 Health Care Delivery: Features of Integrated Systems Support Patient Care Strategies and Access to Care, but… Continue Reading

    EPA Releases Reports on Dioxin Emitted During Deepwater Horizon BP Spill

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    Follow up to previous postings on the Gulf Coast oil spill, this EPA news release: [the agency] released two peer reviewed reports concerning dioxins emitted during the controlled burns of oil during the Deepwater Horizon BP spill. Dioxins describe a group of hundreds of potentially cancer-causing chemicals that can be formed during combustion or burning.… Continue Reading

    U.S., Participants Finalize Anti-Counterfeiting Trade Agreement Text

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    “Participants in the Anti-Counterfeiting Trade Agreement (ACTA) negotiations announced today that they have finalized the text of the Agreement, after resolving the few issues that remained outstanding after the final round of negotiations in Tokyo…Participants in the negotiations include Australia, Canada, the European Union (EU) and its Member States, represented by the European Commission and… Continue Reading