What’s going on here? JPMorgan found that the global supply of publicly listed stocks is shrinking at its fastest pace in at least 25 years. What does this mean? The “supply” of public stocks, in this case, means the dollar value of new shares issued, minus the dollar value of any shares bought back. So when public companies sell more shares, or when private companies sell shares for the first time, supply goes up. And when companies buy back their own shares, supply goes down. Well this year, the supply has already shrunk by $120 billion – much bigger than the $40 billion decline over the course of last year as a whole. That puts the metric on track to get worse for the third year in a row, a run that hasn’t happened since the bank started the logs in 1999. Why should I care? Zooming in: JPMorgan’s analysts are scratching their heads. Stock markets are rising, which should encourage companies to sell shares while they’re fetching higher prices, rather than splashing out to buy them back. The fact that the opposite is happening might reflect the current climate, then. Uncertainty over potential interest rate cuts and the upcoming presidential election seem to have businesses erring on the side of caution, putting them off from selling new shares. Plus, companies are struggling to push up their sales now that customers are cutting back, so they might be buying back their own stocks to lift their earnings-per-share ratios. The bigger picture: The private eye. There were more than 7,000 publicly listed companies in the US before the turn of the millennium, but according to index provider Wilshire, that number has now fallen below 4,000. That has a lot to do with the increasing bank balances of private equity and venture capital firms: they give smaller companies the opportunity to raise funds without dealing with the financial and regulatory burdens that come with going public. | 