Post by Cornflake on Apr 9, 2024 8:31:07 GMT -5
We discussed this topic a while back. I was interested in what Jamie Dimon, head honcho of JP Morgan Chase, had to say recently. It's a good summary of the problem. From CNN:
The number of publicly traded companies in the United States is shrinking. Jamie Dimon, one of the world’s most influential business leaders, is worried.
At their peak in 1996, there were 7,300 publicly traded companies in the US. Today there are about 4,300.
It’s not that America has 40% fewer companies than it did 30 years ago, it’s that companies are increasingly staying private, largely outside the scrutiny of the public eye.
“The total should have grown dramatically, not shrunk,” wrote Dimon, CEO of JPMorgan Chase, in his annual shareholder letter on Monday.
The PE boom: The shrinking public market has private equity to blame — funds that pool money from investors to acquire or invest in companies.
When a PE fund buys a public company, it takes that company private. When it buys a company that isn’t yet public, it is kept that way. That means these funds have complete control over their companies and can encourage them to boost their profits as quickly as possible for a quick sale later down the line.
The number of private companies in the US backed by PE firms has grown from 1,900 to 11,200 over the last two decades, according to JPMorgan data.
Publicly listed companies are subject to regulatory oversight and disclosure requirements, which help ensure transparency and maintain investor confidence. With fewer companies listed, there may be a decrease in overall transparency and investor trust in the market, said Matthew Kennedy, head of data and content at Renaissance Capital.
Additionally, a company owned by PE can obfuscate ownership, what the company actually does and its profit the public and from regulators.
Dimon’s company, of course, makes a huge amount of money from taking companies public, so he’s not exactly an impartial observer. But Dimon said his concerns are broader than JPMorgan’s bottom line: If this trend continues, our understanding of the US economy could become hazier, he argued.
“This trend is serious,” warned Dimon on Monday. “We really need to consider: Is this the outcome we want?”
The number of publicly traded companies in the United States is shrinking. Jamie Dimon, one of the world’s most influential business leaders, is worried.
At their peak in 1996, there were 7,300 publicly traded companies in the US. Today there are about 4,300.
It’s not that America has 40% fewer companies than it did 30 years ago, it’s that companies are increasingly staying private, largely outside the scrutiny of the public eye.
“The total should have grown dramatically, not shrunk,” wrote Dimon, CEO of JPMorgan Chase, in his annual shareholder letter on Monday.
The PE boom: The shrinking public market has private equity to blame — funds that pool money from investors to acquire or invest in companies.
When a PE fund buys a public company, it takes that company private. When it buys a company that isn’t yet public, it is kept that way. That means these funds have complete control over their companies and can encourage them to boost their profits as quickly as possible for a quick sale later down the line.
The number of private companies in the US backed by PE firms has grown from 1,900 to 11,200 over the last two decades, according to JPMorgan data.
Publicly listed companies are subject to regulatory oversight and disclosure requirements, which help ensure transparency and maintain investor confidence. With fewer companies listed, there may be a decrease in overall transparency and investor trust in the market, said Matthew Kennedy, head of data and content at Renaissance Capital.
Additionally, a company owned by PE can obfuscate ownership, what the company actually does and its profit the public and from regulators.
Dimon’s company, of course, makes a huge amount of money from taking companies public, so he’s not exactly an impartial observer. But Dimon said his concerns are broader than JPMorgan’s bottom line: If this trend continues, our understanding of the US economy could become hazier, he argued.
“This trend is serious,” warned Dimon on Monday. “We really need to consider: Is this the outcome we want?”