Where did all the stocks go? Implications

In a strange and subtle way – we have slowly but surely, had fewer public stocks available.

A preview of our coming Newsletter Article …

Where did all the stocks go?

Economics 101 says if we have the same demand and less supply, price will rise-

2017 Declining Stocks US and World Comparison

We were surprised to find out the total US stock headcount is down by almost 50% over the last two decades….

Key findings and reasons-

  • According to many, the costs have risen dramatically to nearly mid-teens percentage of total public offering
  • Continued initial public offering “Pops” – think SNAP – only to fizzle much below initial offering price
  • Increase demands from governance once public
  • Mergers – big public companies getting bigger through acquisition
  • Public company Buybacks – While an entire article could be written on this subject, in brief buybacks lower the total shares outstanding of a company are an appealing use of extra capital as a buyback increases reported earnings all other items considered AND are more flexible than a dividend. Lowering the dividend is very politically incorrect as it may lead investors to believe there is company weakness, with little to no similar mandates on buybacks.
  • Less flexibility being a public company – this especially true from home grown or family run companies
  • Adequate access to capital – in recent years capital from various sources such as debt offerings or venture investors has made it less necessary to go public, once a mandate for liquidity

So if there are less supply and at least similar demand — valuations may be increased!

Look for complete analysis in our Q 3 Newsletter.

Have a Great “Less Supply- Higher Price” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

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