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Overall this should t be a huge surprise. What’s shrinking is the # of public companies, not the combined market cap of public companies. If you make it harde
by mathattack 8y ago
Overall this should t be a huge surprise. What’s shrinking is the # of public companies, not the combined market cap of public companies.
If you make it harder to be a public company (Sarbanes-Oxley) then you have fewer of them, and the benefits to being public accrue to fewer firms. This is an unintended consequence of a well meaning attempt to root out fraud. (Similar to rent controls having the unintended consequence of reducing the housing stock)
I don’t buy the “Woe into us who can’t invest in Uber and Theranos” argument. The amount of venture backed companies waiting to go public pales in comparison to the total market size. In addition, value stocks overpeform growth stocks over long time horizons.
- azinman2 8y agoIt’s hard to imagine that Sarbanes-Oxley alone is a reason why a company wouldn’t go public. You just throw a bit of money and time at lawyers...
- mathattack 8y agoIt’s one reason of many. Putting personal liability on the CFO and CEO makes them a little more likely to stay private longer or accept a buyout. There are other things happening too: tax favorability of debt, plenty of private money, execs not wanting to deal with activist investors. I don’t think the net outcome is the calamity that NY Times concludes. If companies are still getting founded, we are in good shape. I’m more concerned about Financial Services. Very few new banks came up post-crisis, and that’s a sign of a calcified industry.