The Paulson Committee's widely-criticized "interim report" needs to go back to the drawing board, not just to address the weaknesses we detailed in December, but also because new data is confirming that the Committee's fundamental premise was wrong. The Committee had argued that a massive rollback of investor protections was required to address a flagging market for foreign IPOs on United States exchanges, something the Committee blamed on Sarbanes-Oxley and other fraud prevention measures.
However, it turns out that the foreign IPO market is actually robust. As the Wall Street Journal recently reported, a Thomson Financial study found “little evidence of foreign companies shying away from U.S. exchanges since the adoption of Sarbanes-Oxley” and concluded that "foreign IPO activity in the U.S. looks very healthy indeed." According to the study, the $10.6 billion raised in foreign company offerings represented 26% of 2006 IPO volume, the highest level since 1994. Moreover, in 2006, foreign IPOs accounted for 16% of 2006 IPOs on U.S. exchanges, the highest proportion in the 20-year period studied.
Foreign IPOs are also off to a strong start in 2007. Already, four foreign firms have completed substantial IPOs here (in excess of $100 million each): China's JA Solar Holdings (JASO) and 3SBio (SSRX) and Israel's Cellcom Israel (CEL) and Mellanox Technologies (MLNX).
The anti-investor cabal will have to come up with a new argument, because their latest justification for attacking investor protections just doesn't hold water.