The disappearance of listed companies is striking:Handwringing, probably over nothing.The publicly traded company is disappearing. In 1996, about 8,000 firms were listed in the U.S. stock market. Since then, the national economy has grown by nearly $20 trillion. The population has increased by 70 million people. And yet, today, the number of American public companies stands at fewer than 4,000. How can that be?
If I remember correctly, a few years ago Total Stock was down to less than 3,300 names. Why aren't we celebrating the increase? Actually, I think it hit 4,200 within the last couple of years.
(Shrug) It fluctuates.
(And why on earth should an increase in population be expected to lead to an increase in the number of companies, anyway?)
- the costs of listing and of public scrutiny have grown. Corporate governance restrictions etc
- large companies, particularly in tech, have learned from their MBA strategy courses and seek to acquire emerging competitors. Hence Whatsapp and Instagram (and Youtube). So those companies don't reach the stock market. Warren Buffett is in effect doing the same thing - buying whole businesses (albeit at a mega-scale, now).
- due to private equity, and also importantly private credit, a private company has more and larger channels to raise capital without an IPO. The junk bond market also fulfilled this role to an extent, and continues to do so (but private credit funds have grown vastly larger)
There are implications for corporate governance, and for society as a whole. We'd get way off topic and into forbidden areas to discuss this here.
Statistics: Posted by Valuethinker — Wed Apr 24, 2024 4:03 am — Replies 6 — Views 819