In Defense of Public Markets

Aug. 10, 2018 1:43 p.m. ET

The equity markets arguably have never worked better for investors. Despite the threat of trade wars and the inevitability of higher interest rates, the S&P 500 is flirting with an all-time high. Since March 2009, it’s up 322%. Tech stocks have pushed the Nasdaq Composite up a staggering 522% over the same period.

The gains have theoretically benefited any American with a retirement account.

And yet public-company status has never been so passé. Even a rebound in initial public offerings this year hasn’t changed the fact that entrepreneurs are doing everything possible to keep their companies private, evidenced by the unicorn phenomenon.

The sharp falloff in IPOs—by 1980s and 1990s standards—means that stocks retired through mergers, bankruptcies, and other corporate maneuvers aren’t being replaced by new issues. After peaking at 7,600 in 1997, the number of publicly listed U.S. companies has fallen by more than half, to roughly 3,600, according to data from University of Florida professor Jay Ritter.

Enter Elon Musk’s surprising tweet last week, announcing that he, too, would like to leave the ranks of public ownership by taking Tesla (ticker: TSLA) private at $420 a share. His rationale came in a follow-up blog post: “As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla.”

My colleagues spent the week writing about Musk’s gambit and whether it’s even feasible to find financing for a company that’s bleeding cash. It is possible that Musk, like others, senses that stocks are nearing their peak. Going private now would capture his stock’s huge gains before a broader crash. Or

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