I unpack the rise of private markets, the shrinking role of public investing, and why companies including OpenAI and SpaceX may enter your retirement account faster than ever before.
"The companies that go public are those whose current investors are saying, we don't believe this company will go up in value, so we'll sell it to public market investors. When Amazon went public in 1997, it was three years old, valued at $400 million. A $1,000 investment then would be worth more than $3 million today. That kind of return was, in theory, available to anyone with a brokerage account. That era is over. What happened? Private markets got so large, so liquid, and so well-funded that the best companies decided they didn't need to go public anymore. And the folks on their board representing that private capital didn't want to let the upside go to outside investors or retail investors and said, we'll continue to fund the company as there's still a lot of upside here. The median company going public today does so in 14 years after founding compared to six years in 2000. That gap represents years of compounding growth that used to happen in public markets, visible to everyone, accessible to anyone with a brokerage account. Now it happens in private markets. In some, all the juice is being squeezed behind a gate, and the only people behind that gate are institutional investors. Companies in recent IPO cohorts generated over 50% of their market capitalization while still private, meaning that by the time you can buy the stock, more than half the value has already been created and captured. The growth gap between public and private markets is remarkable."
π¬ Discussion
I unpack the rise of private markets, the shrinking role of public investing, and why companies including OpenAI and SpaceX may enter your retirement account faster than ever before.
