http://www.economist.com/node/21555562
Some of the facts in this one make me a little queasy. While I completely agree with economist’s usual pro-deregulation maxim, all signs do indeed point to privatisation lately, regardless of government involvement. As potential/current CFA charterholders, this has particular implications for our current and future job prospects. Thoughts?
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Don’t believe everything you hear. Plus, ever hear of private equity investing? L2 has a ton of crap on that which keeps expanding year over year.
Obviously, public companies will not go away completely, at least not any time soon. However, the theme of the article - that *more* companies are staying or becoming private (and that this is economically inefficient) - is well substantiated. Recent regulations meant as stimuli to “small businesses” are conducive to private companies, which tend to be smaller than public companies. The regulations will not change corporate structure completely, but they can shift the private/public balance to a slightly less efficient point.
“I’m a CPA! I got money b***h!”
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I’m definately looking forward to the PE material, that whole area is what originally got me to do a finance/economics degree. But if, in the (unrealistic) extreme case where the public company does go the way of the dinosaurs, that would leave only private equity which would vastly limit the investor base, maybe not freezing liquidity but taking a chunk out of it for sure. So then somebody would have to come up with a system to improve that liquidity (ie a trading market, and all the rules/regulations that follow), and we’re right back to where we started.
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I wouldn’t go that far. Invisible hand my friend. Plus, PE demands much more due dilly than public equities making investors actually do their homework, commit, and ignore the noise on Jim Cramer’s show.
If anything it would bring about market stability since a flash crash and algo trading event won’t happen.
Private equity would have to vastly increase its investor base. From what I can tell, total PE AUM is somewhere in the neighborhood of $2.4 trillion. The combined market cap of just the S&P 500 companies is almost $12 trillion. So, the PE industry would have to grow by 5x just to take the companies in the S&P 500 private.
You can fondle the cube, but it will not respond.
public companies won’t die
Hope. It is the quintessential human delusion, simultaneously the source of your greatest strength, and greatest weakness.
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I guess on the other hand, it could even be a good thing for us. We have(/will have) the training to be hired by PE, and if average joe self-directed investor can’t easily get into the good companies (and realizes it), they’ll come to the PE firms: more demand=more jobs for us.
One does wonder how much of PE is simply capturig returns on a liquidity premium (and closely related, how much of that premium is related to the limited number of investors who can actually qualify to invest in PE funds.
Refulations may slow the march of IPOs or the balance of capital in private vs public companies, but I can’t see that the corporation will come to an end. It’s just too useful. Besides, private equity always requires an exit option, and buyouts are seldom as lucrative as taking the company public, because the purchasing company in a buyout is always going to discount their offer based on the liquidity of private capital.
You want a quote? Haven’t I written enough already???