Public Company Attrition

I kind of had the suspicion that there were less and less publicly-traded companies around over the last few years, but I had never taken the time to really look into this gut feeling of mine.

But the Wall Street Journal (and a research outfit) did, and their findings related to this phenomenon were pretty interesting…

The number of U.S. firms with publicly traded stock has dropped by half in the past decade. Ten years ago, around 9,100 companies filed annual proxy statements with the Securities and Exchange Commission. Last year, roughly 6,450 did; so far in 2010, only about 4,100 have, estimates Wharton Research Data Services. The Dow Jones U.S. Total Stock Market Index tracks 4,136 stocks, down from 4,599 just a year-and-a-half ago and 5,000 at the end of 2005.

To oversimplify, nobody goes public anymore and we’ve just witnessed a massive wave of bankruptcies and mergers.

According to the story, since 1996 there have been “more deaths than births among stocks”.  The study calculates that “7,725 stocks have disappeared over that period, while just 4,299 new ones have arisen to replace them.”

I kind of suspected that something like this was happening.  I know too many stocks relative to the amount that I don’t know when running screens or talking to other market obsessives.  It didn’t used to be that way and I can’t chalk my increased awareness up to anything I’m doing on my own – if anything, I have grown more knowledgeable about sectors and indexes than I have about individual stories of late.

Jason Zweig‘s excellent article goes into a host of fixes to entice more companies into going public again.  Definitely worth a read.

Source:

The Demise of the IPO – and Ideas on How to Revive It  (WSJ)

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