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Exploring Going Public on US Stock Exchanges: Challenges and Considerations

Discover insights on the challenges and considerations of going public on US stock exchanges in the 21st century. Learn about compliance requirements, barriers, costs, and the impact on emerging companies’ exit routes. This analysis delves into the regulatory landscape, investment banking issues, transaction costs, and the preferences of venture-backed companies. Understand the barriers faced, including high compliance costs, regulatory challenges, and the importance of right-sized compliance for small companies to thrive in the public markets.

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Exploring Going Public on US Stock Exchanges: Challenges and Considerations

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  1. 32% No 32% Not Sure 36% Yes 21st Century Version of “4 Horsemen” Required Would you consider a boutique I-bank to be the lead book runner for going public on a U.S. stock exchange? * Source: DCM Analysis /Survey of Venture-Backed Companies, 2009 – Participants (N) = 108 DCM • Proprietary and Confidential

  2. Sarbanes-Oxley Corporate Governance Regulation Fair Disclosure(Reg FD) Listing Requirements of U.S. Stock Exchanges Other Emerging Company IPOs on International Exchanges: Additional New Liquidity Sources Top 3 Compliance Challenges to Going Public On U.S. Stock Exchanges # of Responses Answered as a Top 3 Issue (Participants =108) Global Venture-Backed IPOs* ** * Sources: Thomson Reuters, Venture Source, Zero2IPO, Venture Intelligence ** Includes VC- and PE-backed IPOs Source: DCM Analysis/Survey of Venture-Backed Companies, 2009 DCM • Proprietary and Confidential

  3. Compliance Requirements (Sarbanes-Oxley, Audit, Governance) Increased Volatility in the Public Markets M&A Better Alternative (Faster Process, More Liquidity) Investment-Banking Related Issues (Analyst Coverage, Requires High Rev Threshold) Transaction Costs of Going Public (Legal, Banker Fees, Non-Compliance Related Costs) Higher Perceived Litigation Risk from U.S. Investor Base Other Barriers to Going Public on U.S. Stock Exchanges Exit Route Preferenceand Expectation (n=108) Top 3 Barriers to Going Public # of Responses Answered as a Top 3 Issue (Participants = 108) M&A IPO Current Regulation Has a Major Impact on How Emerging Companies Consider Their Exit Route Source: DCM Analysis/Survey of Venture-Backed Companies, 2009 DCM • Proprietary and Confidential

  4. Cost of Compliance Is Prohibitive for Small Companies Top 3 Compliance Challenges to Going Public onU.S. Stock Exchanges # of Responses Answered as a Top 3 Issue (Participants = 108) 102 Sarbanes-Oxley Corporate Governance 80 Regulation Fair Disclosure(Reg FD) 74 Listing Requirements of U.S. Stock Exchanges 62 6 Other Emerging Companies Need Right-Sized Compliance Requirements to Thrive Source: DCM Analysis/Survey of Venture-Backed Companies, 2009 DCM • Proprietary and Confidential

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