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May 27, 2012

The Economist: "Companies are like jets; the elite go private."

Photo: Jon Berkeley and The Economist.

The Decline of the Publicly-Traded Company? The public company idea is only about 150 years old and, like the slightly older animal we call "the corporation", is so far only a blip on the screen of world economic history. What will the future hold for companies in which the public is offered a shot at sharing in a company's growth and profits in return for their contribution of capital? Read in The Economist "The endangered public company: The rise and fall of a great invention, and why it matters".

The number of public companies has fallen dramatically over the past decade—by 38% in America since 1997 and 48% in Britain. The number of initial public offerings (IPOs) in America has declined from an average of 311 a year in 1980-2000 to 99 a year in 2001-11. Small companies, those with annual sales of less than $50m before their IPOs—have been hardest hit. In 1980-2000 an average of 165 small companies undertook IPOs in America each year. In 2001-09 that number fell to 30. Facebook will probably give the IPO market a temporary boost—several other companies are queuing up to follow its lead—but they will do little to offset the long-term decline.

Posted by JD Hull at May 27, 2012 11:00 PM


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