In a recent paper titled, "The Disappearing IPO Puzzle: New Insights from Proprietary U.S. Census Data on Private Firms," authors Thomas Chemmanur, Jie He, Xiao Ren, and Tao Shu, explore the reasons or the decline in the number of U.S. IPOs since 2000. In particular, the authors use data in order to test various frequently advanced hypotheses in order to assess whether economic data supports any of these. For example, the paper considers whether the reduction in the number of U.S. IPOs was attributable to a weaker U.S. economy. The authors conclude that a weaker economy is not to blame. This hypothesis had been advanced in a number of papers, noting that, among other things, competitive factors have changed over the years and have contributed to larger companies achieving significant success over their smaller competitors. As a result, those advancing this view argue that smaller private companies fare better in M&A exits to larger companies (as opposed to undertaking IPOs) that can take advantage of economies of scale. However, the authors conclude that there has not been a greater decline in IPOs among smaller companies than among larger companies. However, the authors do find that in the years after 2000, the threshold for going public (but not for M&A opportunities) has increased and companies in more competitive industries with fewer business segments are less likely to go public after 2000. The authors also test the premise that the availability of private capital has led to more companies remaining private and deferring IPOs and only the largest companies seek to undertake IPOs. The authors find that the number of companies undertaking IPOs has declined more in those state and in those industries that attract the most venture capital and private capital investment. The authors conclude that the evidence suggests that the marginal benefit of going public relative to staying private is lower post 2000.
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