LegalMindsTV Interview Transcript: "Challenges & Opportunities Accessing Capital Markets"


Changes in the regulatory landscape are having a profound impact on companies seeking to access the capital markets.  In this exclusive LegalMindsTV interview, Steven Khadavi, Co-Chair of the Capital Markets practice Group at Dorsey & Whitney LLP, discusses some of the challenges these companies face.

According to Khadavi, “companies considering accessing the capital markets need to carefully weight the costs and benefits of these transaction.  In addition to being an expensive and time consuming process, it can create a significant diversion of management’s time, as well as add significant burdens in terms of disclosures and regulatory compliance.”

In addition to the significant disclosure requirements and the impact of Sarbanes-Oxley, Khadavi also discusses the SEC’s scrutiny of risk assessment and executive compensation and how this all affects the challenge of indentifying and attracting potential independent directors – particularly in light of the 2005 WorldCom decision, which held outside Directors personally liable in a shareholder lawsuit.

Khadavi also explores some of the alternative financing vehicles, such as registered direct offerings and PIPES, which gained a lot of publicity around  Warren Buffet’s investments in GE  and Goldman Sachs, which were both done as PIPE transactions.  Though Khadavi believes the market for these alternatives vehicles is limited due to S-3 eligibility requirements and the fact that these transactions are typically at a discount to the current market price.

As far as what’s in store for the year ahead, while Khadavi recognizes that 2009 was obviously a difficult year for the capital markets, he believes that 2010 can be a much better year.  “We think that capital markets are loosening up and if the IPO market does open up, we expect that there will be a good portfolio of companies that will be accessing the capital markets in 2010.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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