The number of publicly traded companies in the United States has been shrinking in recent years, causing concern among business leaders such as Jamie Dimon. At its peak in 1996, there were 7,300 publicly traded companies, but today there are only about 4,300. This trend is due to companies choosing to stay private, largely outside of public scrutiny. The growth of private equity firms, which acquire or invest in companies, has contributed to this decline in publicly listed companies. Private companies backed by PE firms in the US have grown from 1,900 to 11,200 over the last two decades.
Publicly listed companies are subject to regulatory oversight and disclosure requirements, which ensure transparency and investor confidence. With fewer companies listed, concerns arise over a decrease in overall transparency and investor trust in the market. Companies owned by private equity can obfuscate ownership, business practices, and profits from the public and regulators. Dimon’s company, JPMorgan Chase, profits from taking companies public, but he warns that the trend of companies remaining private could cloud understanding of the US economy.
Dimon points out that intensified reporting requirements, higher litigation expenses, costly regulations, shareholder activism, and quarterly earnings pressures may be driving companies away from public markets. He believes that companies should resist the undue pressure of quarterly earnings and focus on long-term growth rather than short-term gains. Shareholder activism has been on the rise, with more companies identifying it as a risk in their annual reports. The influence of proxy advisers in corporate governance decisions has also raised concerns about the independence of decision-making.
Private equity investments have consistently outperformed global equities and fixed income over the past 25 years, making it more lucrative for companies to remain private rather than go public. Dimon warns that if changes aren’t made soon to incentivize companies to go public, the problem will only worsen. In other news, shares of Trump Media & Technology Group have rapidly declined, leading to a one-third loss in the stock’s value. The US government plans to give $6.6 billion to semiconductor manufacturer TSMC to build three factories in Arizona, part of President Biden’s efforts to secure the supply of advanced chips and reduce economic and national security vulnerabilities. TSMC also announced plans to build a third plant in Arizona, bringing their total investment in the state to over $65 billion.
