Private firms looking to delay path to public markets

Private capital has shown great resilience in a volatile environment.
Something to the tune of about $3tn is tied up for private equity-owned companies alone, as of October, according to a report from Bain & Co.
Private companies — especially those in tech — are raising billions of dollars to delay, and sometimes even shun, a path to public markets.
These efforts are creating vast wealth for employees and early-stage stakeholders, while shutting out most people who can’t invest in them through things such as 401(k) retirement accounts provided by some US companies.
The numbers show a dramatic shift from just a few decades ago, and the trend has become even starker as initial public offerings (IPOs) have receded since a pandemic-era frenzy.
As a result, a relatively small group of people have access to the upside while the vast majority of potential investors can only watch from the sidelines.
Over the past two decades, the number of publicly listed companies around the globe has been shrinking. In the US alone, the number of publicly traded companies has dropped by nearly half, from roughly 7,500 in 1997 to fewer than 4,000 today, according to the Center for Research in Security Prices.
Professional investors, especially institutions, have been increasingly turning to private companies; while they carry more risk, they’re drawing an ever-larger share of the capital available.
This shift in attention — and investment — to the private markets has resulted in companies such as OpenAI and SpaceX having an almost insatiable amount of demand from would-be buyers.
Elon Musk’s SpaceX just hit a valuation of $350bn, a number that would place it among the 25 largest companies in the S&P 500. Sam Altman’s OpenAI raised $6.6bn in new funding, bringing its valuation to $157bn.
Fintech giant Stripe Inc bought back shares at a roughly $70bn valuation. And software company Databricks Inc just raised $10bn in new funding, taking its valuation to $62bn.
As long as early-stage investors and employees are happy, the companies benefit from a more lax regulatory environment and don’t have to deal with activist investors pushing for change, or disclosing trade secrets and other matters that the firms would rather keep private.
Private equity firms, which raise funds to take or keep companies private, are dealing with a logjam of companies that they need to either take public or sell.
That number is likely similar for the traditional venture capital community, depending on the data. There are currently more than 1,400 venture-backed unicorns — companies valued at more than $1bn — worth roughly $5tn in total, data from PitchBook show.
The data show there are more than 57,000 private US companies with roughly a third of those fitting the mould of late-stage and venture growth startups — a group that’s typically prime for public listings.
Private companies are valued based on what investors are willing to pay for a stake in them. The difference is that whereas the going price for a public company is updated and displayed in real time on stock exchanges during trading hours, the price paid to buy shares in a private company is in many cases a closely guarded secret, with the valuation occasionally disclosed in a press release after a rare funding round.
One important thing about being private: the company technically doesn’t have to share any details of their business with the public. Yet many of the largest companies still do share details about how the business is operating, even without it being obligatory.
For more than a decade, private markets have enjoyed a remarkable period of sustained growth, more than doubling from $9.7tn in assets under management in 2012, and are estimated to have reached $24.4tn AUM by the end of 2023, according to an EY report.