The key role of the public stock market is to connect all investors with companies, and to help them grow, hire new workers and provide the capital needed for research and development (R&D).
In return, as these companies grow, they provide wealth-building returns for US households.
Intuitively, all these factors return to the economy and strengthen it. The US stock market is the foundation of the US financial system, a contributor to economic success, and a source of financial security for US households.
Today, we highlight some of the key data that supports NASDAQ’s proposal to reinvigorate the US public equity market.
Private markets are growing at the expense of the open market
The balance between the public and private markets has changed significantly since 2000.
- The number of publicly available companies in the US has fallen by about 36%.
- Private equity backs (Green Line) has grown by more than 475%.
This indicates that there is no shortage of entrepreneurs and ideas in the US.
Chart 1: There are as many PE backing companies as public companies now
Private companies are waiting longer and growing bigger
Importantly, these aren’t just businesses that are too small to be published.
There are over 1,400 unicorn Companies worth $5.1 total (over $1 billion) The sign (Chart below) – Increases from $300 billion 10 years ago. Despite the growth of companies with valuations of over $1 billion, the survey shows that only 26% are publicly available. This includes companies worth hundreds of billions of dollars Hundreds Billions of dollars.
Chart 2: More and more unicorn companies are now private
The public market supports household wealth, innovation and economic growth
Certainly, the private and public markets work together.
While the private market often offers the flexibility that early stages and high-growth companies need to scale, the open market offers a well-defined regulatory and liquidity framework that reduces capital costs and promotes accountability beneficial to the broader society.
Still, as highlighted in Nasdaq’s New, there are challenges created by this trend of more companies staying private. White Paper:
- Finance security at home:Retail investors miss out on the opportunity to invest in these companies as public companies. This makes it difficult to ensure retirement for American investors and increases their reliance on social security.
- Employment Growth: According to the survey, companies that own initial public offerings (IPOs) are twenty three% Compared to the annual profit of companies that withdraw their IPO submissions in the first three years after the IPO.
- innovation: Funds from IPOS support innovation through increased R&D spending, and in a study showing that public companies will invest Over 50% More R&D than comparable private companies.
- Economic GrowthOther research also shows growth in the national market It promotes economic growth.
Chart 3: Private Unicorns are better than the broader public market index
Economics is causing a shift
The reason for this shift away from the civic market is economics. Over time, regulations for new public companies have become more expensive and less attractive and have become public.
That is, the average age from the IPO period from 6.9 years ago, 10 years ago, 10.7 years now.
Chart 4: Average age of IPO companies
Meanwhile, other rules change has made private markets easier and cheaper. There was also a tendency for more companies to choose. It remains private Or you will be reverted to personal ownership.
Data shows that global private market AUM has increased by more than 200% since 2013. $14.5 The sign. Increased availability of private money has allowed these companies to remain private.
Make the public markets attractive again
As the public market plays a key role in economic growth, employment, R&D and household wealth, it is important to address the issues that contribute to the decline of the public market.
A recent NASDAQ whitepaper highlighted some common-sense reforms that could help reinvigorate the public markets and, ultimately, the US economy.
These include:
- Reduce the burden of regulations Expand disclosure requirements to the size of the company, as adopted in the UK, and publish by simplifying quarterly reports or providing six-month reports.
- Modernizing proxy voting Processes such as streamlining communications with shareholders, raising ownership thresholds to submit proposals, and the level of shareholder support required to resubmit proposals.
- Leveling the stadium With wise regulations, such as keeping audits relevant and affordable, and preventing unproductive litigation.
Revitalizing the open market will help unlock a stronger American economy
These structural changes will help create economics that will strengthen the US open market and encourage more companies to continue to be public.
Over time, the US stock market will play an even more important role in supporting economic progress and economic security for everyone.
