Five charts to start your day

US companies are disappearing at an alarming rate

This is a great chart from Chartr. It’s something that I was completely unaware of personally. I never knew that the decline in the number of public companies in the US has been so rapid.

Since the late 1990s, the count of publicly traded US companies has plummeted from just over 8,000 in 1996 to approximately 4,600 in 2022, although there has been a slight resurgence more recently. There are various theories to explain this decline. One popular belief among American executives is that stringent new regulations, such as those introduced following the fraud and accounting scandals of the early 2000s, notably the Sarbanes-Oxley Act of 2002, have made going public prohibitively expensive, particularly for smaller companies.

Another significant factor is the rise of private equity and venture capital, which have become increasingly influential in the economy since securities regulations were relaxed in 1996. Estimates suggest that private investors now provide five times more equity financing to US companies than public markets. This shift has led to the emergence of numerous "unicorns" – private startups valued at over a billion dollars – with many of the largest and most influential companies, such as TikTok owner ByteDance and SpaceX, remaining private. Additionally, the market for secondary shares has allowed companies to stay private longer, delaying their eventual listing on public markets.

However, mergers and acquisitions (M&A) are identified as the primary driver of the decline in public companies. Analysis suggests that mergers motivated by financing and innovation have been particularly effective at reducing the number of US listings. The significant acquisitions made by a handful of tech giants – including Google, Microsoft, Apple, Meta, Amazon and Nvidia – have absorbed hundreds of smaller firms that may otherwise have become publicly traded stocks.

Source: Chartr

Coming up:

• Stimulus in China could be an unwelcome tailwind for US inflation

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