This seems like bad news for regular investors, and good news for insiders.
Reporting is burdensome, sure, but being listed on public exchanges is not a requirement.
Reporting is burdensome, sure, but being listed on public exchanges is not a requirement.
Share buyers are clearly rewarding investing for the long term, even with quarterly reporting.
Where is the proof?
As long as CEOs and executives compensation is tied to stock performance, which is highly tied to news and short term results, basic economics and game theory suggests that short-sightedness is indeed encouraged.
This is especially problematic for businesses where plannings have to be done 4/5/6+ years in advance like auto industry, aircrafts or semi conductors.
It takes an awful lot of time and money to plan a new processor architecture and build an ecosystem around it, from chip manufacturing to packaging.
Go down that list and you can see almost all those businesses are ones that plowed and continue to plow billions of dollars into investments that will not pan out for many years.
I don’t think any of the top ones got to where they were with quarter to quarter goals.
They could stop, and switch to quarter to quarter decision making and juice their numbers even more. Maybe they will, and then eventually those businesses will drop in the rankings (IBM/GE/etc).
But the idea that quarterly reporting makes businesses short sighted is clearly false.
Leaders with short term motivations makes businesses short sighted (obviously). Sometimes, that’s justified because the business sector is winding down, sometimes it’s due to incompetence, and sometimes it’s due to greed.
At the end of the day most of these CEOs are valued by the stock price and they need to follow investors expectations which are very often short sighted.
Intel, Boeing and countless others are obvious examples.
All the companies you listed went the "let's cut personnel or bets even if we're making gazzilions to appease the stock market".
nonethewiser made the claim that if quarterly financials are required, then businesses will make short term decisions.
Disproving this only requires me to provide 1 example, although I provided quite a few examples of businesses that provided quarterly financials and still made long term decisions.
I never claimed that quarterly financials prevent short term decisions, so your counterexamples are disproving a claim I did not make.
> All the companies you listed went the "let's cut personnel or bets even if we're making gazzilions to appease the stock market".
It is possible for businesses to change from making long term decisions to short term decisions (and back), and it is also possible that cutting personnel was not done solely to appease the stock market due to fluctuations in demand for labor.
Now, with an admin that's disposed to deregulation, the usual approach to closing that gap is to loosen requirements on public companies. You don't see a lot of people advocating for closing the other half of the gap, where we increase the reporting requirements on private companies. Stricter requirements there seem justified if you look with a bit of realism at how many consumer-facing funds are holding little pieces of unicorns. A lot of people have a stake in SpaceX or Stripe, one way or another. I'd like to see at least a few proposals that make it less comfortable to stay private for so long.
The problem of growing private capital markets and liquidity has been an issue for ~20 years now.
(Nit: I believe that in venture contexts, LP = "limited partners". A "liquidity provider" usually means the same thing as a market maker, at which point you're talking about the secondary / listed / public markets.)
And maybe more Enrons?
Note that FTX, for example, was privately held. If it had been born in the nineties, the norm would be for it to go public, and have at least a modicum of disclosure; staying private would have been weird, a red flag. Instead, "our generation's Enron" had no public markets oversight whatsoever, SOX or otherwise.
So yeah, it's necessary to find a balance. You are choosing between a little regulation on a lot of companies, or a lot of regulation on a smaller and smaller chunk of the economy each year.
Dare I say the special interests that ghost write the bulk of the text of any given legislation are specifically banking on those second and Nth order consequences.
It seems the private/public split along the lines of "public companies should be more scrutinized" worked as intended.
One could make the valid point that those pension funds shouldn't have been (indirectly) invested in those privately-owned unicorns to begin with, but doing that would have most probably come with opportunity costs for those pension funds (as for some reason or another private big companies have been seen as bringing in more money for each dollar spent compared to big public companies, at least when it comes to the last 8-10 years).
As the OP implies, there needs to be some sort of balance between public and private companies, each of them need to be, in effect, more like the other in the eyes of the State/taxman, State-run regulators and the like.
The people and venture funds that officially owned FTX were a narrower group, and I assume they were all qualified investors. But the thing about our disclosure regime is that protecting the official owners of the company is only one goal, the one that serves as the pretext. Informally, various regs on public companies are designed to bring sunlight more generally, and to prevent a wider array of crimes and shenanigans than just defrauding the company's owners. Public companies also have rules and norms around governance which, had FTX been been subject to them, would have made a difference.
> It seems the private/public split along the lines of "public companies should be more scrutinized" worked as intended.
Only if the intention was also, "...and public companies should be an ever-shrinking share of the economy". There are a number of reasons why one might not have intended that. Ordinary investors miss out on early growth, and the good side-effect of general sunshine and governance norms only covers a sliver of the economy, missing many of the most dynamic firms that could use some scrutiny.
it used to be raise money. now that money is done privately. the result exacerbates the gap between private and public markets and ultimately between rich and poor. Private market participation is usually for accredited investors where you need $1m net worth.
Public markets are one of the best ways to create wealth in the US, if the historical record is any hint about the future. Fewer public companies gives regular investors less choice. So if you're a private company and you have 1/2 as many reports to file each year, well now you have a slightly less onerous reporting regime and slightly tilts in favor of going public.
Not anymore, private markets are quite illiquid right now.
What in heavens gave you that idea? A well developed public stock market is such a new (and American thing) and it still makes up a small amount of the capital raised by businesses.
Even within large public companies, there's significant use of bank/private debt.
Aren’t there some factors that require a company to go public? For example, I think there’s a limit on the number of investors (1000?).