Key Takeaways
- • The number of U.S. public companies has fallen to fewer than 4,000 from about 8,000 in 1996, even as the national economy grew by nearly $20 trillion, according to The Atlantic.
- • Private-equity firms managed about 20 percent of total U.S. corporate equity in 2021, up from about 4 percent in 2000, a growth rate nearly five times faster than the overall economy.
- • Taking companies private exempts them from SEC disclosure requirements, leaving roughly one-fifth of the market effectively invisible to investors, the media, and regulators.
- • The 1996 National Securities Markets Improvement Act broke the Depression-era scale-for-transparency bargain by letting private funds raise unlimited capital from institutional investors.
- • Private-equity debt-heavy models face pressure from interest rates at a 20-year high, with funds shifting toward riskier unregulated private lending that regulators cannot fully measure.
Summary
The Atlantic reports that the American public company is disappearing. In 1996 about 8,000 firms were listed on U.S. stock markets, while today the number stands below 4,000, even as the economy has grown by nearly $20 trillion and the population has increased by 70 million. The article attributes much of this decline to private-equity buyouts, which take companies private and, by doing so, exempt them from the financial, operational, risk, and legal disclosures that public companies must provide.
Private equity's footprint has expanded sharply. According to the article, private-equity firms managed about 4 percent of total U.S. corporate equity in 2000 and roughly 20 percent by 2021. The article cites Duke law professor Elisabeth de Fontenay, who warned that current trends could produce "a completely opaque economy." It also quotes Harvard Law professor John Coates's book The Problem of Twelve, which describes information on ownership, business models, and profitability as "disappearing indefinitely into private equity darkness."
The Atlantic draws a historical parallel to the post-1929 regime, when the Securities Act of 1933 and Securities Exchange Act of 1934 established full disclosure requirements and created the SEC. The article argues that the 1996 National Securities Markets Improvement Act created a loophole that undermined that bargain, and notes that 1997 was the peak year for U.S. public company numbers. De Fontenay said the change "completely undermined the incentives companies had to go public." The article reports that an average of 310 companies went public annually from 1980 to 2000, versus 118 from 2001 to 2022.
The article cites a 2021 study associating private-equity ownership of nursing homes with about 22,500 premature deaths from 2005 to 2017, and notes private-equity investment in nursing homes grew from about $5 billion around 2000 to more than $100 billion. It also cites a $12 trillion private-equity industry increasingly funded by unregulated nonbank lenders often affiliated with the same funds. With interest rates at a 20-year high, the article says funds have moved toward riskier private financing. Ana Arsov, managing director at Moody's Investors Service, said regulators lack the information needed to assess risk. The industry disputes the criticism, and the SEC proposed a rule in August requiring private-equity fund advisers to provide more information to investors, which the article describes as insufficient.
Private equity's footprint has expanded sharply. According to the article, private-equity firms managed about 4 percent of total U.S. corporate equity in 2000 and roughly 20 percent by 2021. The article cites Duke law professor Elisabeth de Fontenay, who warned that current trends could produce "a completely opaque economy." It also quotes Harvard Law professor John Coates's book The Problem of Twelve, which describes information on ownership, business models, and profitability as "disappearing indefinitely into private equity darkness."
The Atlantic draws a historical parallel to the post-1929 regime, when the Securities Act of 1933 and Securities Exchange Act of 1934 established full disclosure requirements and created the SEC. The article argues that the 1996 National Securities Markets Improvement Act created a loophole that undermined that bargain, and notes that 1997 was the peak year for U.S. public company numbers. De Fontenay said the change "completely undermined the incentives companies had to go public." The article reports that an average of 310 companies went public annually from 1980 to 2000, versus 118 from 2001 to 2022.
The article cites a 2021 study associating private-equity ownership of nursing homes with about 22,500 premature deaths from 2005 to 2017, and notes private-equity investment in nursing homes grew from about $5 billion around 2000 to more than $100 billion. It also cites a $12 trillion private-equity industry increasingly funded by unregulated nonbank lenders often affiliated with the same funds. With interest rates at a 20-year high, the article says funds have moved toward riskier private financing. Ana Arsov, managing director at Moody's Investors Service, said regulators lack the information needed to assess risk. The industry disputes the criticism, and the SEC proposed a rule in August requiring private-equity fund advisers to provide more information to investors, which the article describes as insufficient.
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