meek-investor

It is a fundamental tenet of capitalism that an investor should be fully informed of all matters relating to his investment. Over the years, regulatory authorities have been increasing disclosure requirements so that there is as much transparency as possible. But has this gone too far ? And has the overreaching legal recourses, especially in the US, led to the purpose being defeated ? No this is not a boring, dry post. Read on. Take the case of Manchester United's IPO filing (if you ask what Manchester United is, I'll clobber you). IPO filers are required to disclose the risks associated with their business. Fair enough. But look at Man U's risks disclosed. They have listed 51 risks. Amongst them are such gems as There could be a decline in the popularity of football (beggars belief)  To service our indebtedness, we require cash, and our ability to generate cash is subject to many factors beyond our control. ( Ha Ha) We are dependent upon the performance and popularity of o...

Remember the Sarbanes Oxley Act ? The one that was promulgated in the aftermath of Enron. This was supposed to ensure that accounting scandals are greatly minimised. The Act that had every business chief howling that it was draconian , that compliance was putting a huge cost on business, etc etc. Well, it turns out that investors, whom the Act was supposed to protect, actually don't care all that much about accounting scandals. Take the case of the "success" of many of the Chinese IPOs in the US market. In the fine print , most of them have disclosed accounting deficiencies. But does the market care ?? Not one bit. Take Renren which IPOed yesterday. The stock rose some 50% above the issue price. Never mind that the Chair of the Audit Committee resigned on Tuesday, they changed a key growth figure, they disclosed a "material weakness" that they did not have enough people in their accounts department and a "significant deficiency" that they had no policy...

The United States is well known for the excesses of its lawyers. Citizens of other nations, while marveling at the upholding of the law in the US, are left scratching their heads in bewilderment at the famous McDonald’s case or the Washington DC laundry case . Cases like this have resulted in some labeling gems such as “Contents Hot” on a cup of coffee or “Remove the baby before folding the pram”. This post covers such an impact on the glamorous world of accounting. When lawsuits against companies began mounting in the late eighties and early nineties, companies started to become extremely careful in disclosing any information at all, other than the statutory minimum, for fear of being sued. Best to say nothing ; say your name ( presumably safe) and say nothing more. The powers that be, in the US, realized that disclosure of more information , especially plans and strategies would be good for investors . In order to encourage companies to do so, some protection against being sued had ...