The De-Equitization of America

It’s interesting to think of there being a shortage of stocks. And to take it a step further and ask the question “If everyone needs to own stocks for their retirement account, and there are less stocks to be owned, what should multiples for the fewer available stocks be?

Here’s the Wall Street Journal with some surprising data:

The U.S. is becoming “de-equitized,” putting some of the best investing prospects out of the reach of ordinary Americans. The stock market once offered a way for average investors to buy into the fastest-growing companies, helping spread the nation’s wealth. Since the financial crisis, the equity market has become bifurcated, with a private option available to select investors and a public one that is more of a last resort for companies.

The number of U.S.-listed companies has declined by more than 3,000 since peaking at 9,113 in 1997, according to the University of Chicago’s Center for Research in Security Prices. As of June, there were 5,734 such public companies, little more than in 1982, when the economy was less than half its current size. Meanwhile, the average public company’s valuation has ballooned.

With more money than ever available privately and looser regulations for raising it, will this trend reverse any time soon? Does this play into the “rich getting richer” conceit, considering that the masses aren’t able to do much in terms of investing in private equities?

Source:

America’s Roster of Public Companies Is Shrinking Before Our Eyes (Wall Street Journal)