The number of public firms in America has fallen by more than a third since the 1990s
of a company that had stayed private for more than half a century. Investors queued to secure shares in the Ford Motor Company. Their price jumped $5 on the first day’s trading. Yet by the time the company listed, it had no real need for capital. Henry Ford, its founder, had long been hostile to the idea of going public. It was almost a decade after his death in 1947 when the family foundation at last decided to sell some of its Ford shares to the public.
To grasp the rise of private capital, go back to Ford’s day, when finance was simpler. Private capital was a bank loan, a contract between a borrower and lender, or a grubstake raised from family members, friends or business associates. If larger sums were needed a firm might issue securities in the public markets—equity shares or high-grade bonds.
Deeper forces were at work, too, which strengthened after the financial crisis. The secular decline in long-term interest rates, caused in part by abundant savings, was given an extra push by the easy-money policies of central banks. Yields on stocks and corporate bonds also declined. The venturesome looked to private markets for higher returns. By their nature, such markets are illiquid and more lightly regulated.
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