I’ve written before about the IPO drought and the missing tier of investment banking support for smaller companies as a result of the decimalization of trading. What’s made transacting cheaper for investors has made the cost of being public higher and less worthwhile, to some degree (firms don’t write research when there are no profits to be had from market-making).
I’ve also talked a lot about the fact that the stock market is shrinking – buybacks and hungry retiree accounts have sopped up the supply of quality equities, thus lending the market an elevated multiple in a time of slowing earnings growth.
This morning, the New York Post picks up on some new research that’s worth thinking about…
A new study suggests that an estimated 10 million prospective finance jobs have been lost since 2000 and countless billions in capital was not created due to the proliferation of robotic trading platforms.
“We would have over 13,000 publicly listed companies today instead of the paltry 5,000 we now have,” David Weild, chief executive of Weild & Co. and former Nasdaq vice chairman, told The Post. And that has also resulted in subdued volumes, with stock market participants sidelined by a dearth of initial public offerings, Weild said.
The reference point of the year 2000 pertains to the on-set of decimalization. It also happened to have coincided with the biggest IPO bubble in history, with thousands of quasi-companies floating issues to salivating buyers.
Obviously this is not so simple an issue where we can point to any one culprit (robots!), but it’s definitely a contributing factor. Progress giveth to some and taketh away from others. Why should capital markets and the financial industry be any different than the rest of the economy?