Guy Charged With Making IPOs Great Again Not Sure IPOs Are So Great

The SEC's new Corporation Finance chief's a little half-hearted on his boss' going-public crusade.
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(Getty Images)

Among the many incredible, amazing and beautiful outcomes of the ongoing regulatory bonfire along Pennsylvania Avenue will be the unshackling of the initial public offering market. Companies that are just dying to go public are choking on the reams of paperwork required to sell shares on the open market, and the reams of paperwork required for regular filings thereafter. Luckily, this aspect of the American carnage is coming to an end. Bill Hinman, a Silicon Valley lawyer who brought you such hit IPOs as Google, Facebook and Alibaba—the latter being a collaboration with one Jay Clayton—is coming to Washington to lead the SEC’s Corporation Finance division and a resurgence in going public.

Well, sort of: It seems that Hinman’s not as convinced as some that the IPO drought, such as it is, is the result of stifling regulation.

In an interview, Mr. Hinman said he didn’t believe the decline in the number of public companies could be blamed entirely on regulation. But he said spurring more public offerings is a worthy goal of regulators, because investors benefit from the detailed public disclosures….

“To the extent the SEC can make it more attractive and efficient to raise capital here, we are going to want to do that,” he said. “That is our primary focus and challenge going forward.”

Except, of course, that those public disclosures are precisely what lots of private companies might be seeking to avoid, and which the Trump administration is seeking to gut. But no matter: His old colleague and new boss’ obsession with increasing IPOs doesn’t appear to be rubbing off on Hinman, or finding many takers among the allegedly pre-IPO crowd.

He also expressed interest in expanding the 2012 Jumpstart Our Business Startups Act. The law, passed with bipartisan support, was hailed as the first sign that Washington understood how the internet could be used to help smaller companies raise money without turning to Wall Street….

Some market participants say they don’t see the problem that Mr. Clayton has said he wants to solve. “The real question is do small-growth companies have access to capital, and they do,” said Robin Graham, managing director and head of technology, media and communications at Oppenheimer & Co. Inc. “It’s just in the private markets.”

SEC Turns to Big Deals Lawyer to Spur More Public Companies [WSJ]


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Now Here Are Some Guys Who Knew How To Rip Off A Client

One aspect of good salesmanship is that you have to offer an attractive proposition not merely to the abstract entity that is your nominal client - El Paso, Italy, Greece - but also to the specific human being who is your contact at that client. Telling a corporate treasurer who is five years from retirement that a trade will have a significantly positive NPV due to huge cash flows in years 11-15 is not always as effective a sales technique as buying him a nice steak and an evening of unclothed entertainment. I suspect, though, that the latter strategy is more highly correlated with whatever you're selling ending up on the front page/op-ed page/ Anyway, I definitely admire these guys for this particular con*: The SEC alleges that Argyll Investments LLC’s purported stock-collateralized loan business is merely a fraud perpetrated by James T. Miceli and Douglas A. McClain, Jr. to acquire publicly traded stock from corporate officers and directors at a discounted price from market value, separately sell the shares for full market value in order to fund the loan, and use the remaining proceeds from the sale of the collateral for their own personal benefit. Miceli, McClain, and Argyll typically lied to borrowers by explicitly telling them that their collateral would not be sold unless a default occurred. However, since Argyll had no independent source of funds other than the borrowers’ collateral, Argyll often sold the collateral prior to closing the loan and then used the proceeds to fund it. Got it? Argyll gave corporate executives margin loans at 50-70% loan-to-value based on the market price of their stock (based on the volume weighted average price over five days leading up to the closing of the loan). They took the stock as "collateral." They then trousered the stock and sold it for, y'know, 100% of the market value, with 50-70% of that funding the loan and the remaining 30-50% funding miscellaneous expenses that presumably included unclothed entertainment for themselves. The loans had three-year terms and were not prepayable for 12-18 months, so the expected life of the scam was at least 12 months (but see below).