The trend has picked up since Congress toughened rules in 2002, amid corporate accounting scandals. Predictions the Sarbanes-Oxley Act would spur firms to go private haven't come to pass; instead, a growing number have deregistered, also known as "going dark."

"Dark" firms remain public but delist from an exchange or market and no longer file quarterly and annual reports to the Securities and Exchange Commission. Shareholder approval isn't needed, and deregistering is faster, easier and cheaper than going private, which involves buying out shareholders. The process is open to companies with fewer than 300 to 500 shareholders of record; the number of actual shareholders can be much larger.

"It's gathering steam," said Thomas Magill, a partner in the Orange County, Calif., law office of Gibson, Dunn & Crutcher, who helped Anacomp, a San Diego document-storage firm that was public since 1970, to go dark in January.

A Wharton School study concurs. It found nearly 200 companies went dark in 2003, up from 30 in 1999, while the number of firms going private rose slightly. A final 2004 tally isn't available yet.

Smaller companies are more likely to go dark. Last year, the list included Coast Dental Services Inc., of Tampa; Kyzen Corp., a Nashville, Tenn., specialty chemical company; and Quality Products Inc., a Columbus, Ohio, equipment manufacturer. All said mounting compliance costs outweighed the benefits of being a public company.

Shareholders can take a hit in the process. University of Maryland associate professor Alexander Triantis, a co-author of the Wharton study, said stocks fall 10 percent on average when companies announce they are going dark. Shares may trade in the Pink Sheets afterward, but activity is less frequent and more volatile. Dark firms can't tap capital markets and usually pay more to borrow from banks.

Given such drawbacks, researchers aren't sure why companies go dark. Triantis said shareholders should benefit if the motivation is cost saving. But researchers found evidence that firms that go dark tend to have poorer accounting, suggesting management may try to hide lousy performance - or worse - by turning out the lights.

At a minimum, "more could take place without shareholders knowing about it," cautions former SEC corporation finance division director David Martin, now a partner at Covington & Burling, in Washington. "A company that has real shareholders and real business isn't going to want to go dark willy-nilly."

Others say the move makes sense given a frenzy of initial public offerings in the 1990s by companies that now struggle with costly requirements to certify financial results and assess internal controls.

"People tend to have a negative, knee-jerk reaction to it," said Magill. He said going dark "is not a nefarious plot" to blind shareholders, but a way to retain their stake in the company and save money, estimating a smaller firm might save more than $1 million a year by going dark.

Terry Babilla, general counsel and chief operating officer at Dallas-based Sport Supply Group Inc., calls it "one of the best moves we've made." The company's stock fell under $1 on the news, but bounced back toward $3, a level Babilla said it wouldn't have reached without going dark.

Sport Supply removed the financial expert it brought in to serve on the audit committee, cut directors' pay and the number of board meetings. Babilla said the biggest saving was freeing management to focus on running the company. He said small public companies "cannot afford to be fully compliant with all these new rules and regulations."

Stephen Nelson, a New York attorney who filed a 2003 petition asking the SEC to tighten deregistration rules, says firms shouldn't be free to tap capital markets in good times, only to shut the lights on investors when financial reporting becomes "inconvenient."

While states may require companies to continue supplying investors with certain information, critics say disclosure deteriorates once firms go dark. Internet postings may replace mailings and "right away, you see a tendency to avoid the hard stuff," said Nelson.

The result? Shareholders "don't know anything, which keeps them quiet," and "you don't have the SEC on your back all the time, because the SEC doesn't have anything to look at."

Nelson's petition on behalf of investment firms, including Hummingbird, asks the SEC to rethink its "record holder" approach, which aggregates shares held at brokerage firms for investors. It asks the SEC to count individual shareholders, not record holders, noting United Road Services Inc. and SmartDisk Corp., qualified to deregister despite having 6,000 or more shareholders each. SEC corporation finance division associate director Paula Dubberly said the agency is giving the petition "careful consideration."