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Private equity: Growing web connects PE markets as fewer companies go public

The shrinking number of publicly listed stocks is a growing worry for policymakers concerned about job creation, income inequality and consolidation towards monopoly pricing among a few very large and profitable quoted companies, but the real story is growing sophistication in private financing.

At the start of May, with US stock markets at record highs and investors hoping president Donald Trump’s tax reforms might yet prolong a bull run already into its ninth year, Adena Friedman, president and chief executive of Nasdaq, chose her moment to ladle out some cold water. 

She pointed the stock market bulls away from rising index values and towards the dramatic and prolonged fall in the number of listed companies. 

Dealogic data show that 2016 was the third-slowest year for US initial public offerings on record, with just 98 new flotations, the fewest in any single year this decade and the lowest since 2009. 

Adena_Friedman-160x186

Adena Friedman,
Nasdaq
 

Friedman unveiled a blueprint to address what she calls fundamental structural concerns in the public equity markets, calling for new limits on frivolous shareholder litigation, on costly and burdensome disclosures and management of proxy processes, and on shareholder activism. Friedman argues that: 

“As the US has continued to add layer after layer of obligation, we have reached a point where companies increasingly question whether the benefits of public ownership are worth the burdens. If not addressed, this could ultimately represent an existential threat to our markets.”