Where Have All The Public Companies Gone?
From the WSJ today, this interesting bit:
In less than two decades, more than half of all publicly traded companies have disappeared. There were 7,355 U.S. stocks in November 1997, according to the Center for Research in Security Prices at the University of Chicago’s Booth School of Business. Nowadays, there are fewer than 3,600....
“Twenty years ago, there were over 4,000 stocks smaller†than the inclusion cutoff for the Russell 2000, says Lubos Pastor, a finance professor at the University of Chicago. “That number is down to less than 1,000 today.â€
The article discusses the trend in the context of stock pickers having a smaller palette to work with, as it were, but obviously there are likely some economic implications here as well. The first words the popped into my head were "Dodd-Frank" but for all the problems with that law, the chart makes clear that most of the decline occurred long before that law was passed.
Postscript: The title of the article is "Stock Picking Is Dying Because There Are No More Stocks to Pick." Maybe, but I would have been less charitable by saying that it was because as a group stock pickers have never been able to out-perform the market averages, even when there were twice as many stocks to choose from.
Update: A reader writes:
Matt Levine, Bloomberg writer, has suggested recently that the reason this has happened is not that regulations on public companies have become especially onerous, it's that access to private money is easier now.
Public company regulations were always kind of onerous, but it was worth it to get access to the money only available in the public market. These days, when you can raise billions of dollars without ever going public, why bother?
In the context of stock-picking, I suppose all the good ones have moved to private equity firms. As I suppose, have gone the good industry analysts
