SEC Turns to Big Deals Lawyer to Spur More Public Companies

By Dave Michaels Features Dow Jones Newswires

To spur more companies to go public, the new head of the Securities and Exchange Commission has turned to a veteran Silicon Valley lawyer whose career has involved some of the biggest deals in history.

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Bill Hinman has worked on initial public offerings and other transactions that involved Apple Inc. founder Steve Jobs, Google Inc. founders Larry Page and Sergey Brin, and Facebook Inc. chief executive Mark Zuckerberg.

Mr. Hinman, 61 years old, a former partner at Simpson Thacher & Bartlett LLP in Palo Alto, Calif., is the first SEC director in years to come from Silicon Valley rather than New York, Boston or Washington.

He will direct the SEC's corporate finance division, which oversees IPOs and the voluminous disclosures that explain the business to investors. New commission chairman Jay Clayton, at his Senate confirmation hearing in March, called for scaling back requirements on listed firms, saying the government should make it "more attractive" to go public.

Mr. Clayton's tenure could mark a shift for the state of U.S. public companies, which have faced mounting regulations since the U.S. dot-com bust and Enron Corp. accounting scandal of the early 2000s along withe Dodd Frank financial-overhaul law of 2010.

The U.S. now has a deficit of more than 5,000 listed companies, compared with the number predicted by its level of wealth and investor rights, according to research by economists Craig Doidge, Andrew Karolyi and René Stulz.

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In an interview, Mr. Hinman said he didn't believe the decline in the number of public companies could be blamed entirely on regulation. But he said spurring more public offerings is a worthy goal of regulators, because investors benefit from the detailed public disclosures.

He also expressed interest in expanding the 2012 Jumpstart Our Business Startups Act. The law, passed with bipartisan support, was hailed as the first sign that Washington understood how the internet could be used to help smaller companies raise money without turning to Wall Street.

"To the extent the SEC can make it more attractive and efficient to raise capital here, we are going to want to do that," he said. "That is our primary focus and challenge going forward."

Some of the companies Mr. Hinman has worked with or helped take public over the past two decades diverged from the traditional model of a public firm. He advised Apple in the 1990s on the deal that brought Mr. Jobs back to the company, which involved the purchase of Mr. Jobs's other company, NeXT Software Inc.

In 2004, He also worked on Google's IPO, which used a Dutch auction. The process was designed to yield an opening price that more accurately reflected the value of the company.

That outcome could mean that investors who secured shares through the auction couldn't quickly unload them for a profit, because the stock was less likely to rocket higher during first day trading. Mr. Hinman urged the company to disclose the risk in plain English, telling auction buyers they could be victims of a "winner's curse": On one hand they had secured shares of a hot IPO, and on the other they could lose money if they tried to sell them immediately.

"Bill turned a seeming bug into a feature," said Michael Grimes, head of technology banking at Morgan Stanley, which was the lead bank on the deal.

Mr. Hinman grew up in upstate New York. His mother was a telephone operator for the Crouse-Hinds Company, a specialty manufacturer of electrical equipment, and his father was a billing clerk for the Oscar Mayer Company. Both of his grandfathers worked at an Alcoa plant in Massena, N.Y., across the St. Lawrence River from Canada.

After studying as an undergraduate at Michigan State University and graduating from Cornell University Law School, he joined the bank regulatory group at Shearman & Sterling LLP's New York office. In 1989, Mr. Hinman was involved in Mexico's debt restructuring, a deal that led to several more years of work in Brazil and Argentina.

Burned out from constant travel, he relocated to California in 1994 to focus on technology clients, partly because it would allow him to work with clients that were close to home. Mr. Hinman bought a house in Montana several years ago in anticipation of retirement and doing more fly-fishing and skiing.

"If you practice in Silicon Valley you don't have to travel as much because you have a lot of great companies in your backyard," he said. "The companies innovate in products and services and that carries over to how they raise capital and run themselves. So from an SEC lawyer's perspective, it's always been a fun environment."

Over the past five years, Mr. Hinman helped take public Facebook and Chinese e-commerce company Alibaba Group Holding Ltd., whose 2014 listing was the biggest IPO ever. Alibaba's deal was especially complex because it involved a giant Chinese firm that had to satisfy regulators and investors in both China and the U.S.

Mr. Hinman worked on the transaction with Mr. Clayton, who represented the banks that sold Alibaba's shares to the public.

In Silicon Valley, he has watched big, private companies put off IPOs in favor of raising more cash from private investors.

Companies raised $2.1 trillion in private placements of stocks and bonds in 2014, compared with about $1.35 trillion for public sales of equity and debt, according to SEC figures. The collapse in U.S. listings has happened as fast-growing startups such as Uber Technologies Inc. have been able to get the cash they need from venture capitalists.

Some market participants say they don't see the problem that Mr. Clayton has said he wants to solve. "The real question is do small-growth companies have access to capital, and they do," said Robin Graham, managing director and head of technology, media and communications at Oppenheimer & Co. Inc. "It's just in the private markets."

Write to Dave Michaels at dave.michaels@wsj.com

(END) Dow Jones Newswires

May 12, 2017 05:44 ET (09:44 GMT)