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Opalesque Industry Update - Pantheon has published new research that looks at the phenomenon and causes of shrinking public
markets. The number of publicly listed companies in the U.S. has roughly halved since 1996 and the
authors of the research, Cullen Wilson and Brian Buenneke, explain why they believe that this trend is
likely to persist and why in their view it matters to institutional investors. Whilst the authors identified the trend to be a global one, the research focuses on the U.S. public market where the number of listed companies has fallen from 7,322 in 1996 to 3,671 in 2016. The authors identified various factors that have contributed to the shrinkage, including the increased net cost of listing which has resulted in fewer IPOs bringing new companies into the market, while merger activity continues to remove companies from it. They noted the significant influx of capital into public markets over the period from 1976, in particular via mutual and index funds, and observed that investment dollars are consequently concentrated into fewer and older listed companies. The authors concluded that the trend seems likely to persist given healthy access to private capital sources and the active M&A environment. As the public market shrinks, they noted the parallel decline in the breadth of opportunities available in investors and concluded that such investors may consequentially consider a basket of alternatives to access younger and more rapidly growing companies. The full report is available here. |
Industry Updates
Pantheon examines the shrinking market for public equities
Thursday, June 29, 2017
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