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Steven Khadavi of Dorsey & Whitney LLP Discusses the Challenges & Opportunities Accessing Capital Markets with LegalMinds.TV


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 transactions. 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.

“Accessing the capital markets is a long process,’ says Khadavi. The lead time to commencing a transaction is probably a year or so and in that time you need to ”start thinking like a public company" This includes engaging PCAOB certified auditors and an accounting firm that’s familiar with SEC reporting and be able to go through the capital markets process. Companies also need to consider the impact of the Sarbanes-Oxley Act, which entails large upfront costs for testing internal controls and procedures - particularly the first time around.

Added 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 identifying 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 (Private Investments in Public Equity) which gained a lot of publicity around Warren Buffet’s investments in GE (NYSE:GE) and Goldman Sachs (NYSE:GS), which were both done as PIPE transactions. Though Khadavi believes the market for these alternative 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 number of companies that will be accessing the capital markets in 2010 - particularly portfolio companies of private equity companies that have been on the side lines for the last year or so looking for an exit.


Published by LegalMinds Media LLC, LegalMinds.TV ( features exclusive video interviews with leading legal experts focused on key issues in securities regulation, intellectual property, corporate finance, litigation, private equity, environmental, real estate and tax law, etc. In addition to providing timely content for corporate executives, board members and their counsel, LegalMindsTV offers a unique marketing platform for top attorneys and law firms.


 corporate finance
 capital markets
 Sarbanes Oxley Act
 dorsey & whitney

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