General Bearing Files to Delist its Stock

General Bearing Corp. (USA) has filed with the U.S. Securities and Exchange Commission to deregister and delist its stock. The SEC Form 15 filing is a move to terminate public registration and public trading of the company's common stock. The move suspends the increasingly onerous reporting obligations required under Sarbanes-Oxley and similar regulations which apply to publicly traded companies. If accepted by the SEC, deregistration would occur within 90 days of the filing. After that, the stock will no longer be publicly traded, and the company's reporting requirements will largely end. General Bearing said deregistration is now an option because it has shares in the hands of fewer than 300 shareholders. The top management group alone controls more than 70% of outstanding shares. Yesterday, trading was suspended for General Bearing and it was delisted from the NASDAQ stock exchange. It will now trade on the Pink Sheets as symbol GNRL.PK. The move has been hinted for some time, and over the past several years the management team has tried to take the company private by acquiring virtually all outstanding shares. Over a year ago, management said in discussing potential privatization: "In sum, due to these various factors, not only do we believe that the Company is not realizing any of the benefits of being a public company, but, in fact, the Company is substantially inhibited in its growth and development. We believe that the Company is, and will be, increasingly adversely affected going forward by the costs and other burdens of continuing to be publicly held." General Bearing's board voted unanimously for the deregistration, citing: • the significant cost increases that the Company would incur in 2005 and thereafter associated with continued compliance with the Sarbanes-Oxley Act of 2002, and more specifically with Section 404 of the Act • the ongoing costs associated with the preparation and filing of the Company's periodic reports with the SEC • the thinly-traded nature of the Company's stock • the Company's belief that the market price for its stock doesn't reflect the Company's current value and, as a result, the Company has not been able to use its common stock for acquisitions or to raise capital • the lack of coverage by analysts of the Company's common stock In its statement, General said, "Deregistration is in the best interests of the company and its shareholders. Deregistration will provide savings of both time and money on a go-forward basis and allow management to focus on maximizing shareholder value by better using the company's resources." General Bearing is far from the first company to deregister rather than continue to incur high compliance costs driven by Sarbanes-Oxley. And hundreds of other public companies have reported high surprise expenses related to Sarbanes-Oxley. NN Inc. recently reported lower-than-expected earnings, in no small part related to unexpectedly high compliance and Sarbanes-Oxley 404 costs. NN management expressed frustration with the continued costs and the unaccounted costs of management attention distracted from running the business. On the other hand, NN said, SOX404 compliance was beneficial because it put rigor and systems in place which it felt were beneficial to NN in the long run.