The rise of private markets
where companies are free from the constraints of quarterly reporting is
already reshaping the makeup of the public stock market.
It’s sparked a secular decline in public listings.
It’s led a prominent CEO to recently declare his intention of taking his
company private. It could also result in a loosening of rules around
what’s required of public companies.
On Friday, President Donald Trump said he instructed the Securities and
Exchange Commission to study whether companies should release earnings twice a year, rather than four times. He tweeted that business leaders told him it "would allow greater flexibility & save money."
Such a practice, while potentially helping companies to move away from short-term profit goals,
would also limit investors’ visibility into corporate performance, a
move that echoes the more limited transparency among private companies.
It’s a clear sign that for public trading venues, private markets are tough competition.
Ample venture capital funding and low rates have left firms with myriad
options for raising capital without going through an increasingly
expensive initial public offering process and adhering to stringent
listing requirements. There are now fewer public U.S. companies than in
1976, even though gross domestic product has grown sharply, according to
a Credit Suisse report from last year.
The public markets could lose one more member if Tesla chief Elon Musk gets his way and completes a take-private deal.
Though the outcome of that effort is uncertain, Mr. Musk indicated in a
memo last week that his thinking is influenced by a grass-is-greener
view of private markets. “Basically, I’m trying to accomplish an outcome
where Tesla can operate at its best, free from as much distraction and
short-term thinking as possible," he wrote.
Given this backdrop, it’s not surprising that politicians want to
reshape the financial markets. And it’s not just Mr. Trump tossing out
ideas. Massachusetts Senator Elizabeth Warren recently proposed
that large companies be required to consider the interests of all
stakeholders, including workers, and not just focus on maximizing
shareholder value.
The stock market is slowly transforming itself.
Everyday investors should hope these changes don’t reduce the
transparency and access that public shareholders have historically
enjoyed.
What do you think the public stock market will be like in 20 years? Tell the author your thoughts at ben.eisen@wsj.com.
|
|
-
Sugar futures, which have long been sliding due to changing consumer tastes, closed Friday at 10.18 cents a pound, the lowest in a decade, according to CQG.
-
Turkey's credit rating was dropped by both of the biggest rating
agencies on Friday. S&P Global cut the country's foreign currency
credit rating to B+ from BB- while Moody's Investors Service cut its
rating to Ba3 from Ba2.
On this day in 1932, Franklin Delano Roosevelt kicked off his
presidential campaign with a fiery speech in Columbus, Ohio, putting
forth a nine-point plan for economic recovery. Among his proposals:
reforms of Wall Street underwriting and trading practices, increased
regulation of commercial banks, a more aggressive role for the Federal
Reserve, and a crackdown on utility companies.
|
|
 |
Amazon trades at a lofty 85 times future earnings, and over the past
three years its multiple has averaged around 115 times, according to
FactSet. PHOTO: ABHISHEK CHINNAPPA/REUTERS
|
|
|
Some market bulls are dismissing valuation concerns. While
shares of companies like Amazon.com and Netflix have surged this year
to price/earnings ratios that are several times the market’s longtime
average, many fans of these investments contend that such metrics can overstate risks.
At the heart of a new Fed debate: bonds or bills? Last
year, the Federal Reserve began shrinking its $4.5 billion portfolio of
mostly mortgage and Treasury securities. But they are now beginning an
internal debate: What will the portfolio look like when they’re done shrinking it?
‘‘Green bonds’’ are a gray area: Not all are equal. Definitions can be so fuzzy that environmentally conscious investors might end up funding fossil-fueled power stations.
Greece’s international financial bailout officially ends today. But as officials in Athens and the EU pat themselves on the back, pessimism and anger prevail for many in Greek society after a decade of economic depression has left people exhausted and disillusioned.
|
|
|
|
What We've Heard on the Street
|
|
|
|
|
|
|
Apple—Up 0.5%: Shares of the iPhone maker rose every day last week, including a 2% climb Friday. The stock has fallen just twice this month.
Sears—Unchanged:
Sears CEO Edward Lampert for years has called the shots as its chief
executive, largest shareholder and biggest lender. But his latest play
to keep the struggling chain afloat is out of his hands.
|
|
|
|
|
|
| 
Posts
