In a recent paper, author Brian Cheffins contends that the concerns about the death of the US public company are overstated. Although there has been a decline in the number of public companies since 2000, public companies continue to play an important role in the US economy. In assessing the role of public companies, Cheffins considers the ratio of aggregate market capitalization of publicly traded stocks to gross domestic product. The ratio is now near an all time high. Public companies are now larger than in prior periods. For example, he notes that in 2017, the market capitalization of listed US companies averaged almost $7 billion, which is more than ten times as much on an inflation-adjusted basis as the 1976 average.
Cheffins attributes the decline in the number of US IPOs (measured against historical levels) to market factors rather than regulatory burdens. The author notes that promising companies are exiting through M&A transactions, rather than IPOs. Unless the availability of private capital and M&A opportunities dry up, he notes that the current trend should be expected to continue. While his thesis may be accurate, the concerns expressed by representatives of the Securities and Exchange Commission that a smaller percentage of American investors now has the opportunity to benefit from the periods of the most significant growth of promising emerging companies also is true.