Skip to main content

The Journal Gazette

  • Associated Press
    Uber is valued at more than $60 billion, but the car-hailing company is among many in the United States that prefer to remain under private ownership, eschewing the trend of offering publicly traded stock.
September 23, 2016 1:01 AM

Fewer stocks, fewer shares

Decline of publicly traded companies crimps mutual funds

STAN CHOE | Associated Press

NEW YORK – More companies don’t want you, or any other investor, to buy their stock.

Instead of listing their shares on a stock exchange, businesses are going private or never going public in the first place. Security company ADT, for example, pulled its shares off the market this spring after going private in a nearly $7 billion buyout. Uber, meanwhile, makes it simple for customers to hail a car, but investors can’t easily buy a piece of the privately held company, which is valued at more than $60 billion.

The number of publicly traded U.S. stocks has been on the decline since the dot-com bust, and there are now only about 3,300 listed in the Center for Research in Security Prices’ database. That’s down by roughly half since the late ’90s, and it’s the lowest number since 1984, when the U.S. population was about three-quarters the size it is today.

For companies, going or staying private means they can more easily ignore the whims of Wall Street analysts and short-term traders who focus on this quarter’s numbers rather than long-term growth.

Companies may also be feeling less inclined to sell their stock in an initial public offering when they can instead raise cash cheaply by borrowing at close to record-low interest rates.

But while the trend may be good for CEOs, it’s also limiting the menu of choices available to investors and to the mutual-fund managers they hire.

“This could be one of many reasons why active managers are lagging behind their indexes,” Steven DeSanctis, an equity strategist at Jefferies, wrote in a recent report.

With fewer companies to choose from, it’s becoming more difficult for fund managers to differentiate their portfolios from others and to justify the fees they charge. Not only are fewer companies publicly traded, but many of the companies that still list on exchanges have fewer shares available to trade.

Companies have been on a buyback binge in recent years. They’re repurchasing their shares to eliminate them, which gives their per-share earnings a boost at a time when the global economy is still growing only slowly.