Why do companies go private?...?

Question

And what is the reflection of the economy, if any, when a multitude of companies are going private?

Answer 1

One reason many are going private is the Sarbanes-Oxley Act, which was imposed upon all US public corporations in 2002.

This abomination has TRIPLED the operating expenses of the average company, increasing consumer prices, slashing profits by as much as 70% on average, and introducing unwarranted scrutiny.

Here's an analogy: Suppose you were falsely accused of a crime with no supporting evidence whatsoever, and were required to scrape up every legal and financial document ever associated with you. Of course, because you had committed no crime and there was no evidence that you had, you'd likely be acquitted; but not until it had cost you 70% of your income to defend yourself.

Now suppose this happened to you every year...


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Answer 2

Companies go private when a group of Management ultimately decides to buy the company because they think they could run things much better, and ultimately get mega-super-rich in return, since they will have only private investors to worry about, NOT the public.

When a multitude of companies are going private, there is hardly a reflection. It all depends on the market. There might be an increase in private companies, but companies are built all the time. And plus, success is never really guaranteed. In fair competition, somebody is bound to lose at one point of another, so the companies that choose to go private might not survive in the long run. It's not a matter of what people see or the trends that are happening, it's a matter of whether or not they become profitable after the switch. If they don't somebody else did, and those puppies are the ones that stay, public or not.

Answer 3

Companies are now penalized for making longer term investments in infrastructure or market share, etc. by the market since this usually drives down SHORT-TERM profits in order to increase long-term profits. By going private they avoid this since the new owners have a longer-term view.

Answer 4

to enrich the owners and to avoid public scrutiny of their financials and their operations. if lot of companies are doing it, would seem to indicate that there is a lot of easy credit out there to finance such ventures