Private stock marketplaces have added a new dimension to the capital markets. What does their growth mean for the economy, for public oversight and for the dialogue between companies
and their investors?
Dominic McMullan, Brunswick, London
Stock markets have recovered since the financial crisis and there has been a resurgence of the initial public offering (IPO) pipeline this year. But the slump in public stock markets in recent years created a need for an alternative. Since the peak in 1996, when more than 900 companies launched IPOs, successive market crises took their toll: there were just 85 new US listings for 2008 and 2009 combined, according to Dealogic data. Private stock marketplaces, such as SecondMarket, sprung up to fill the gap. They have also proven to be a good training ground for companies, such as LinkedIn, that ultimately want to go public. Also, these markets are one of a growing number of alternatives for companies that may want to stay private at a time when public company regulation has become too burdensome.
What are the implications of this new order in the capital markets? Felix Salmon, a finance blogger at Reuters and one of four people whose thoughts on the subject we sought, argues that with more alternatives for companies to raise new capital and for early investors to realize the value of their shares, a public listing is no longer as compelling as it once was. Furthermore, oversight of companies doesn’t necessarily require them to go public. However, Salmon recognizes that something may be lost with the dwindling of the public markets: it will make it harder for people of ordinary means to buy a stake in growth companies.