Public Companies Disappearing - Investors Lose Opportunities

1. 2Q GDP Hits 4.1% on Strong Consumer Spending
2. Number of US Public Companies Falls by Almost 50%
3. Fewer Public Companies = Lost Investor Opportunities


Most investors are not aware of this but the number of publicly-traded companies listed on US stock exchanges has plunged almost 50% since the peak in 1996. This phenomenon is not limited to the United States. It is also happening in Canada, Switzerland, Germany, France, the UK and other developed nations, which have seen the number of listed companies fall 20%–60% from the peak in the last couple of decades.

It has never been fun to be a publicly-traded company. Dealing with increasingly complex government and industry regulations is expensive; dealing with shareholders and the media is time consuming; and keeping your publicly-traded company competitive is a never ending challenge.

The other thing that is changing, perhaps the most important thing, is that more and more large companies no longer need to be listed on stock exchanges in order to raise capital. As more large companies elect to remain privately-held, and more publicly-traded companies convert to private, investors are deprived of sharing in the growth of some of America’s most exciting innovations. That’s what we’ll talk about today.

Before we get to that discussion, I will briefly analyze last Friday’s initial estimate of 2Q GDP.

2Q GDP Hits 4.1%, Best Since 2014, Strong Consumer Spending

Gross Domestic Product grew at a solid 4.1% annual rate in the second quarter, its best pace since 2014, boosting hopes that the economy is ready to break out of its decade-long slumber. The number was slightly below the pre-report consensus of 4.2% but at least it showed a surge in consumer spending and business investment.

That's the fastest rate of the growth since the 4.9% in the 3Q of 2014 and the third-best growth rate since the Great Recession. In addition to the strong 2Q, the Commerce Department revised its 1Q GDP reading up from 2.0% to 2.2%. The economy has now averaged 3.1% GDP growth over the last six months ended June.

Real GDP

In addition to the rise in consumer and business spending, increases in exports and government spending also helped. Consumer spending rose 4% while business investment grew 7.3% and federal government outlays increased by 3.5%.