Since the late 1990s, the number of publicly traded U.S. stocks has shrunk by nearly 50%. This movement comes despite a mostly healthy run for the U.S. stock market overall, including dividends, which have been up over 500% since 2000. In other words, overall stock value has been a winning proposition for investors, but their investment choices have been nearly cut in half.
What’s happened? Where have all the publicly traded stocks gone? And what does this mean for folks trying to invest for a happy and secure retirement?
By The Numbers
The tally of publicly traded companies in the U.S. fell from about 8,800 in 1997 to just 3,952 by the end of 2024. The famed Wilshire 5000 index, started in 1974 to measure the breadth of the market—small, mid, and large-cap stocks—now includes just 3,600 equities, down from its original 5,000.
Several factors contribute to this trend, but the stock environment highlights two key drivers: consolidation from mergers and acquisitions and a slowdown in companies going public.
Two Stocks Down To One
Mergers and acquisitions, or M&A, have significantly affected this decline. Some newsworthy examples include:
M&A activity effectively fuses two companies into one stock. Some signs point to the Trump administration further decreasing M&A regulation. If that holds true, the trend could accelerate over the next several years.
Fewer IPOs
In 1996, the sum of IPOs reached 677. However, by 2016, this quantity had contracted to 133. Aside from a temporary surge between 2020 and 2021, largely driven by a fleeting demand for special purpose acquisition companies, or SPACs, the downward trajectory has continued.
The shrinking IPO catalog can be traced back to the high cost of an initial public offering, coupled with increasing regulatory requirements, which make the public markets less attractive for many companies. Another culprit has been the massive influx of private equity dollars, which provide viable paths for businesses to expand without needing to go public.
The result is a reshaped IPO landscape in the U.S., with fewer companies choosing to navigate the complexities of public markets.
Private Equity’s Role In The Decline
NASA and SpaceX receive most of the credit for launching craft into space, but it’s the cadre of private-equity-backed companies that have truly skyrocketed. Over the past two decades, the growth in PE assets under management, or AUM, underscores this trend and demonstrates how compelling the option has become for businesses.
In 2000, global PE AUM was approximately $600 billion. By 2023, this figure had surged to over $8.2 trillion, marking a more than 13-fold increase. In addition to saving on the expense of initial public offerings, many firms opt for private equity investments to avoid the regulatory complexities and scrutiny associated with them. According to Apollo Global, the number of PE-backed companies soared from fewer than 1,000 in 2000 to over 10,000 by 2024. This growth is at least partially at the expense of the number of exchange-listed companies.
The investor implications are significant. The evaporating pool of publicly traded stocks limits opportunities for individual and institutional investors to participate in the public markets. Conversely, the growing influence of private equity is reshaping the corporate landscape. It highlights the need for investors to acknowledge an environment where a substantial portion of economic activity occurs outside their traditional investment options.
Broader Implications For Investors
Acknowledging the new reality means adjusting to the far-reaching implications of retirement planning. With the count of available stocks sliced in half since the late 1990s, the choices are increasingly limited, and that can possibly change portfolio construction and opportunity evaluation. The following themes are at play:
Fewer Investment Options
The reduction in public companies means there are fewer diversification options. Investors feel more pressure to focus on the larger, established companies dominating the market.
More Conglomerates And Diversified Giants
Mega-cap companies like Alphabet, Amazon, and Microsoft own diverse business lines under one umbrella. For example, Alphabet owns YouTube, Fitbit, and Mandiant, businesses that could have been standalone public companies. This consolidation limits opportunities to invest directly in smaller, specialized companies.
Increased Market Concentration
The dominance of trillion-dollar companies means more of the market’s performance increasingly hinges on a handful of stocks. This concentration can amplify risk if those companies stumble, even though many of these giants have delivered significant earnings growth and performance in the past.
Index Fund Dynamics
With larger companies taking up a disproportionate share of the S&P 500 and other indices, new money flowing into index funds primarily benefits these dominant players, further concentrating market power.
Private Investing’s Growing Role
Private equity offers an alternative to public markets but remains less accessible to everyday investors. These investments often require significant capital, have long time horizons, and come with liquidity challenges. Publicly traded private equity firms offer some exposure but also carry unique risks.
Bottom Line
Although the U.S. stock market has fewer publicly traded companies than it did decades ago, it remains a powerful engine for building wealth. The key to continued success is not abandoning foundational principles but understanding the new dynamic and remaining flexible enough to make necessary tweaks.
It can be stressful to grapple with the outsized role of massive conglomerates and top-heavy cap-weighted indices in today’s market. Still, the growing dominance of private companies provides the rationale to counterbalance by searching for access to private opportunities. Though these options may be more difficult to liquidate and come with higher risks, they play an increasingly pivotal role in a market where high-growth companies stay private longer.
Whether investors like this trend or not, it doesn’t appear to be going away. Adapting to the evolving balance between public and private markets and embracing thoughtful strategies to navigate a world with fewer public stocks without abandoning traditional growth opportunities can be challenging. However, with careful planning, a diversified approach, and a thoughtful understanding of the new dynamics, it’s entirely possible for future happy retirees to thrive in the changing investment ecosystem.