In the past, we’ve highlighted the worrying trend of the declining number of listed companies. So, we thought it was worth highlighting a recent staff report from the U.S. Securities and Exchange Commission (SEC) that also focuses on this issue and the value of going public.
The report is full of data and information, but we summarize key findings below.
Decline in public companies entirely due to fewer small companies
The SEC’s data shows that the number of publicly listed companies has nearly halved since 2000.
But the insight they add is that this is entirely due to fewer “small” companies (market cap of less than $250 million).
- In 2000, some 4,000 of the more than 6,000 listed companies were small (66%).
- Now, there are just 1,200 small companies, out of 3,500 listed companies (34%).
- Some of this is due to inflation since the $250 million threshold is nominal. Adjusting for inflation, it would have risen to $478 million by June 2025, which would increase the count of “small” companies to over 1500 (43%), using FactSet data.
So, even accounting for inflation, the share of small companies is down 23 percentage points from 2000!
Chart 1: The number of small, listed companies is down 70% since 2000
Source: SEC Office of the Advocate for Small Business Capital Formation
Meanwhile, the number of large (market cap of more than $250 million) listed companies has been remarkably stable around 2,300 (also ignoring inflation).
Fewer small companies due to mergers, delistings and fewer IPOs
So, the SEC attributes this decline in small companies to three (other) factors:
- 4,000 mergers between public firms from 1996 to 2020.
- Delisting of smaller companies.
- Low number of initial public offerings (IPOs).
This is consistent with Nasdaq’s research. In 2019, we showed that U.S. equity markets need nearly 180 IPOs per year just to offset regulatory delistings and M&A activity (on average).
More recently, we’ve highlighted the downshift in the number of IPOs this century as companies wait longer to IPO, in part because they need to be mature enough to afford the increased cost of being public, with compliance costs adding to $9 billion per year for all listed companies, and weighing more heavily on smaller companies.
These challenges make it hard to keep the number of public companies steady, let alone grow it.
Public companies see lower borrowing costs, more capex and more assets
Given the compliance costs (and the growth of private markets), the common refrain is that it’s “easier” for companies to stay private. But the SEC’s report shows that this simplistic view overlooks the many benefits of going public.
Not only does going public provide companies with capital, but it also “facilitates their overall ability to raise funds,” with credit spreads falling nearly 25%, borrowing costs declining and the pool of lenders growing.
And four years post-IPO, benefitting from this improved access to capital, research shows that public companies have 40% greater capex and 50% larger assets than similar private companies (and more bank debt since they can borrow at lower rates).
Chart 2: Public companies grow capex and assets faster than comparable private companies
Source: SEC Office of the Advocate for Small Business Capital Formation
This data gets at the heart of the value of public markets. Companies that go public invest more than similar private companies, which is one way that public markets help grow the economy.
This is why Nasdaq continues to advocate for sensible reforms to strengthen public markets and the economy.
