Working for publicly-listed companies took up all of Paul Barbeau’s time when he was starting out as a young securities lawyer in 2004.
“That has been the story, and I know for all my friends and colleagues, the people I grew up with professionally, it has been the same story for them repeated over and over.” fuelled by the pandemic surge in stock markets, 33 companies went public in a flurry of offerings. But any optimism that this uptick would continue has now been dashed.During the initial public offering boom of 2021, 33 companies went public. Since then, roughly half of the Canadian startups have returned to the private markets.
As public markets stagnate, private capital keeps growing. According to private market investment manager and advisory firm Hamilton Lane, the amount of private market assets under management globally went from roughly US$600-billion in 2000 to more than US$9.7-trillion in 2022. Global consulting giant McKinsey and Company estimates that total surpassed US$13-trillion as of June 30, 2023.
In 2002, large publicly-traded operating companies were still plentiful in Canada. The vast majority of TSX listings at the time – 1,166 – were operating companies, while investment products such as ETFs and closed-end funds represented a small proportion of the market, just 174 at the time. More than 90 per cent of companies globally with annual revenues of more than US$100-million are now privately held, according to Hamilton Lane data. And what is publicly traded, Mr. Wollatt points out, is increasingly concentrated.Nvidia edged ahead of other tech companies in June 2024 to become the world's most valuable publicly traded company, placing it among the likes of Apple and Amazon in the S&P seven.
As the cost of going public has grown and the potential returns have shrunk, CVCA chief executive Kim Furlong said many Canadian entrepreneurs are opting to seek private investments from outside of Canada. Becoming a publicly-traded business still offers that allure, but the cost-benefit analysis has changed. The benefits have stayed the same, while the cost of compliance keeps on growing alongside the list of governance and disclosure requirements public companies face.