Bizzy’s AM Coffee Biz-Econ-Life Links (080206)

Free Links:

• The car business realignment continues — For the first seven months of this year, General Motors, Ford, and DaimlerChrysler’s unit sales have fallen 14%, 10%, and 10%, respectively, compared to a year ago. Toyota, Honda, and Nissan? +10%, +7%, and -8%. The month of July was especially awful for the old Big Three — GM, Ford, and Chrysler were down 22%, 35%, and 37%. They’re feigning lack of concern, with a GM spokesman claiming that last year’s sales were “inflated” by “employee pricing” incentives and the like. No amount of cleverness will solve GM’s or Ford’s problems if they don’t ship more vehicles.

• I would be remiss if I didn’t mourn OH02’s graceful and hopefully not permanent exit from the blogosphere. Despite the claims of a lot of lefty-come-latelys, OH02 did more than anyone to bring attention to the Paul Hackett campaign and help it get to the critical mass it achieved in its near-upset of Jean Schmidt last August. Your place on the blogroll isn’t going anywhere, Chris, and I look forward to the return of the Ohio Happy Funtime Blog.

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• The Wall Street Journal’s Alan Murray investigated why so many initial public offerings are taking place overseas, and found additional culprits besides Sarbanes-Oxley:
  

  Is Wall Street having its Detroit moment? After a century as the undisputed financial capital of the world, New York has suddenly discovered there’s competition out there.

  The threat has been captured in a single fact: 24 of the top 25 initial public offerings of stock last year were issued on exchanges outside of the U.S.

  That statistic is repeated frequently as financiers and policy makers wring their hands over what’s happened to the nation’s capital markets. Eager for a simple solution, some point to Sarbanes-Oxley, the law passed in response to Enron and other U.S. corporate scandals.

  ….. I went to the London Stock Exchange’s Web site. What I discovered was a detailed study by Oxera Consulting Ltd. that looked at the cost of raising capital in various markets.

  And guess what? The biggest source of the U.S.’s disadvantage, according to this study, wasn’t the cost of complying with Sarbanes-Oxley — although that was certainly noted. Instead, it was the high fees charged by Wall Street investment banks. In the U.S., those fees equal 6.5% to 7% of the value of shares offered. Across Europe, they are 3% to 4%. In Asia, they can be even lower.

  For a big IPO, that difference easily swamps estimates of the cost of Sarbanes-Oxley. If the U.S. is losing its competitiveness, maybe some of the blame goes to its financial houses for charging excessive fees in their home market. Does anyone really believe they deserve 7% of the value of a newly listed company?

  I sure don’t. But before I would dismiss SarBox’s relative significance, I’d want to know how much in the way of SarBox compliance costs is built into the fees the investment bankers charge, especially if those percentage fees are now higher than they were before the law took effect.