Cramer's TheStreet.com TV

Return to Article

TheStreet.com TV Recap: Sarbanes-Oxley Has Worked

TheStreet.com Staff

The idea that the IPO market has shrunk in the U.S. because firms don't want to comply with Sarbanes-Oxley and are going overseas is a "red herring," Jim Cramer said on the TheStreet.com TV's Wall St. Confidential video Webcast Friday.

After a lot of initial public offerings last year, the pipeline has been emptied and now the IPOs are of "lower quality," he told Aaron Task, the host of Wall St. Confidential. This, Cramer continued, happens periodically, as it is a cyclical business.

"We'll recharge and some companies will maybe come to market next year," he said. But, as for now, Cramer sees very little that he likes here.

Concerning Sarbanes-Oxley, he said he believes the act is doing a "great thing."

"I think it has served as a barrier the Securities and Exchange Commission always should have had," Cramer said. "The SEC's view is that everything can come public, provided that you disclose," which is not protective of anyone.

He said he sees the SEC's job as being twofold: to stop corruption in the system and to shine light on whatever the corruption is. However, Cramer does not feel disclosure kept "crummy companies" from coming public in 1999 and 2000.

When Task asked if the venture capitalists are more inclined to be owners now because of Sarbanes-Oxley, Cramer said they want whatever can make them cash out easiest, regardless of whether the quality of the IPO is good or not.

"We have to guard against the rapacious nature of the venture capitalists and the rapacious nature of the brokerage houses, all of which exist to be able to ring the register or bring in fees," he said. "One reason why I started TheStreet.com is because the rapacious nature of the system needs to be exposed."

Cramer said he is "hardly a conspirator about it," as he made a lot of money off the game, mostly off the public because the public did the wrong thing. But he believes the public should recognize that nobody's out to save them.

This, however, does not mean Cramer wants market-players to refrain from investing in the stock market.

"Existing companies are radically undervalued because of the problem with mutual funds only liking growth," he said. "I don't think the stock market is rigged; I think the new products coming out are [really bad]. But a lot of the existing product is good and worth taking a look at."

Further, Cramer said he regards private equity as being "anti-rapacious ... because they enable the portion of the market that will never catch a bid from the mutual funds to be profitable for you."

The private-equity firms are a "great equalizer for the individual investor," he said. They bring out high-yield debt that people want, and they generate "tremendous" fees for the brokerage houses.