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I see a fair amount about how index funds will ruin the stock market. According to this Wall Street Journal article there is a different and more immediate issue. Seems that there is a drop off in companies raising capital on the open market, instead restricting IPOs or their equivalent to a hand-selected group of insiders. Is this a case for some kind of regulation? Hard to see what kind.
Most of my clientele for the past 30 years has been small private startups working towards an exit strategy of either an IPO or a acquisition by a bigger fish, although a few were determined to grow organically and remain private.
Today my clients are all medical device companies that are generally unwilling to roll the dice on IPOs or even the uncertainty of which big fish will swallow them. They are increasingly accepting big development investments from one big company in exchange for the assurance that they will be acquired by that same big company when the development/FDA approval cycle is completed. The assurance of a predetermined landing site assuages the concerns of founders whom I believe to be considerably more risk averse than they were years ago.
That’s just a gut feeling unsupported by data, and it applies only to the market sector in which I live, but I doubt this is an atypical phenomenon.
So, investors are clamoring to get on the private investment game with no guardrails or regulation to protect them. What could go wrong?!
I’ve been involved on the finance side of private equity and public firms for most of my career. Where did the public companies go:
1)Mergers
2)Take private transactions via Private Equity funding
3)Stay private because of private equity funding…OpenAI
Below is a link to good article on public companies.
Where Did All the Public Companies Go? | Tuck School of Business
As a finance leader, I’ve seen there is a very high cost in maintaining compliance in a public company. $3M-$10M per year minimum. With audits, advisors, outside director’s fees and higher finance and compliance staffing needed to support government and market requirements. Quarterly earnings reporting distracts from running the business. That goes away with a
take private transaction. A reduction in regulation might lower the cost savings. More government focus on merger activity might lessen the deals that take public companies out of circulation.
Harold, I think your assessment is spot on regarding the reduced number of public companies. It seems the availability of private equity (PE) funding is a significant driver.
Private equity has traditionally been deemed appropriate only for sophisticated, high earning/high net worth investors. Recently and somewhat magically, it is now appropriate for 401(k) savers, most of whom are unable to perform the necessary due diligence to invest in opaque, illiquid investments.
Now my question. Wouldn’t it make more sense to push companies to go public if they want access to public funds rather than allowing PE and private credit (PC) to be offered in retirement savings plans? And if so, what can be done to prevent this from happening?
The reporting and disclosure requirements for public companies DO provide value even if they are cumbersome. Prior to the existence of the SEC, main street investors were routinely fleeced. I worry that if PE/PC are allowed into retirement plans, we will see the average retirement saver/investor getting suckered into mediocre returns, or worse.
Corporations have a life cycle. For most, at some time they will be publicly owned. When they lose relevance they are often taken back to private ownership. The dream of most entrepreneurs is to take their startup public and get the big bucks.
I like to use AI for my research. Here are some AI generated facts in regard to the number of listed exchange stocks in USA. *****AI Overview
The number of US public stocks has dropped drastically: from around 8,000+ in the 1990s (peaking near 8,800 in 1997) down to roughly 4,000-4,900 by late 2024/2025, representing a decline of about 50% due to regulatory costs, M&A, and private capital alternatives, with a trend continuing into 2025.
1990s (Peak Era)
2025 (Current Trend)
Why the Decline?
I have heard commentary lately here in Australia about the decline of companies seeking public investment. The number of listed entities on the ASX (Australian Stock Exchange) has declined from about 2200 to about 2000 over the last 10 years. Yet over that time our economy and stock market have both performed pretty well. The reason seems to be a combination of more private funding available and the ability to avoid all the reporting and disclosure rules associated with being listed on the ASX.
Regardless, I’m still comfortable that stock markets around the world will contain enough high quality companies to maintain diversified index fund investing as a very good choice.
The stock market got squeezed by Venture capital (VC) which bets on moonshot startups, and private equity (PE) which bets on “cash cows” companies that are not publicly listed. The US stock market peaked at 7300 listed companies in 1996, now down to about 4000 in 2025, while PEs fund over 11,500 companies in 2025. Institutional investors like pension funds, endowments, billionaires have enjoyed the high rate of ROI from private equities for many years – until now when they look to retail investors to alleviate the payout crises.
Regulations are some reasons companies delayed IPO or delisted to private status. The US has massive scale of VC and PE (50-64% global market share) and is the incubator for vast number of unicorns (startups over $1B+).
Capital (i.e. money) finds ways to migrate toward short-term profit engines, whether startup companies, leverage buy-outs, betting markets, meme stocks, or crypto hypes.
I believe that a private company is just that—private. If I build a business from the ground up and grow it into a multi-billion dollar enterprise, who I choose to sell a stake to is my decision alone. These aren’t publicly traded companies owned by shareholders—they’re owned by individual founders or small partnerships. The scale of success shouldn’t diminish a founder’s autonomy. In a free market, if you assumed the risk to build something, you should retain the right to decide who becomes part of it.
The appropriate time to voice agreement or disagreement with how a company is run comes when—and if—the founder decides to go public through a stock market listing. At that point, you can vote with your wallet by choosing whether or not to invest your own money.
I think it’s a matter of scale. There’s a difference between a small family business and SpaceX. When the Wall Street Journal starts worrying about anti-capitalist behavior and the wealth gap, I think it’s time to pay attention:
“That’s created a two-tier market. One tier is a private club of sorts, where a privileged group can obtain shares of companies still in their early growth stages. Everyone else is left with older, slower-growing names. The dynamic is exacerbating the wealth disparity in the U.S., as the growth in the net worth of the richest Americans is far outpacing all other income groups.”
I’ve always seen corporate profits as a two-tier system. The top tier is for the founders and early-stage partners who take the biggest risks and, if successful, reap the biggest rewards. The second tier is for the public market investors who come in later. They face less risk and receive less reward—which is how it should be. I honestly doubt whether retail investors should be playing in those early stages at all; the risk-to-reward ratio just doesn’t make sense for them.