One of the most remarkable trends in the financial markets has been the decline of publicly traded U.S. equities. About half as many stocks are listed as there were 25 years ago. What is driving this phenomenon and what are the implications for investors?

A number of articles addressing this trend have noted the sharp drop in initial public offerings (IPOs) since the 1990s, most recently one in The Atlantic magazine by Frank Partnoy, a law professor at UC Berkeley and frequent financial writer. However, many of the articles argue that there is little if anything to be concerned about. But subtly related is another recent trend: rising calls for antitrust action to reduce the monopoly power of market-dominant companies, including Amazon and Facebook.

Partnoy’s complaint

Judging from the subheading of his article, Partnoy’s worry is that “The number of IPOs is declining, and that could mean that small investors are getting shut out of the most lucrative deals.” He quotes Thomas Farley, the head of the NYSE Group, as saying the drop, “may severely limit [companies’ opportunities] for economic growth, hiring, and wealth creation.” Adena Friedman, NASDAQ’s CEO, warned that if the trend continues, “job creation and economic growth could suffer, and income inequality could worsen as average investors become increasingly shut out of the most attractive offerings.”

Partnoy then observes – with noteworthy understatement – that, of course, “Farley and Friedman have a financial stake in the health of the exchanges.” It is in their business’ interest to promote the listing of public companies in any way that they can. Therefore, there is good reason to discount their statements.

But Partnoy is not alone in his concern. In an article in The Economist’s “Schumpeter” column (which has no byline) last year, the writer opined that, “Continued decline in the number of listed firms would be bad news. It would be a symptom of the oligopolisation of the economy, which will harm growth in the long run.” It adds that “Ordinary Americans without connections are meanwhile unable directly to own shares in new companies that are active in the fastest-growing parts of the economy.”

On the other hand

However, studies by The Harvard Law School Forum on Corporate Governance and Financial Regulation and Vanguard, and articles in Bloomberg and The Wall Street Journal argue that there is little to worry about concerning the drop in the numbers of IPOs and public companies.