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B T implementation of the Sarbanes-Oxley Act, along with new governance restrictions imposed by the NYSE and Nasdaq, has added signiï¬cant costs and oversight to public companies, particularly smaller ones. Equity sold to Qualiï¬ed Institutional Buyers (QIBs) through Rule 144A doesnât have to be registered with the SEC or listed on an exchange. An over-thecounter market that offers roughly similar ï¬nancing beneï¬ts without the regulation and disclosure required of a public listing has obvious appeal. Some private companies considering the 144A market are viewing it as âfor lifeâ status, while others are using it as an intermediate step in raising capital, on their way to a public listing. As the 144A market grows and the platform for trading among QIB investors becomes more efï¬cient and standardized, the regulatory changes over the past few years may well make this quasi-public ownership structure a permanent and substantial feature of capital markets. The second force driving convergence is the changing economics of private equity, and the asset management industry in general. In the vein of âsuccess is its own worst enemy,â the substantial returns earned by prominent private equity ï¬rms have ï¬ooded the industry with new capital. With limited partners expecting
Journal of Applied Corporate Finance – Wiley
Published: Jun 1, 2007
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