Shrinking Global Public Equity: Impact on Investors and Markets

Key Takeaways

• Global supply of public equity is shrinking at its fastest pace in at least 25 years due to economic and geopolitical uncertainties.
• The net figure of global public equities has shrunk by $120bn this year, exceeding last year's $40bn decline, leading to a third consecutive year of decline.
• JPMorgan's data shows buybacks continuing at the same pace, reaching about $1.2tn by December, while IPOs and other share sales fell short of forecasts.
• Number of listed companies in the US has fallen from over 7,000 to fewer than 4,000 since 2000, similar trend in Europe and the UK.
• Companies are turning to private markets or venture capitalists to raise funds, rather than going public due to financial and regulatory burdens.

News Content

The global supply of public equity is shrinking at its fastest pace in 25 years, due to economic and geopolitical uncertainty. Companies are buying back large volumes of their own stock instead of selling new shares, leading to a net decrease of $120 billion in public equities this year. JPMorgan analysts expected equity offerings to rise as stock markets rallied, but concerns about inflation and economic growth have hindered this trend.

Despite strong stock market performance, initial public offerings and share sales have fallen short of expectations, reflecting persistent uncertainty among companies worldwide. The reduction in listed companies in the US and Europe, along with the increasing reliance on private markets and venture capitalists, is contributing to this trend. Overall, the shrinking public equity supply is creating challenges for investors and fund managers, potentially altering long-term benchmarks and skewing risks and returns in the market.

Analysis

The decline in global public equity supply can be attributed to economic and geopolitical uncertainties, which have prompted companies to repurchase their own stocks instead of issuing new shares. This has resulted in a significant $120 billion reduction in public equities this year. In the short term, this trend may lead to challenges for investors and fund managers, as well as altering long-term benchmarks and skewing market risks and returns. In the long term, the increasing reliance on private markets and venture capitalists could reshape the investment landscape. The persistent uncertainty among companies worldwide is likely to continue hindering equity offerings, with potential consequences for global financial markets and investor strategies.

Do You Know?

• Shrinking supply of public equity: Companies are buying back large volumes of their own stock instead of selling new shares, leading to a net decrease of $120 billion in public equities this year.
• Impact on investors and fund managers: The reduction in listed companies in the US and Europe, along with the increasing reliance on private markets and venture capitalists, is creating challenges for investors and fund managers by potentially altering long-term benchmarks and skewing risks and returns in the market.
• Factors hindering equity offerings: Concerns about inflation and economic growth have hindered the expected rise in equity offerings despite strong stock market performance.