By Paul R. La Monica

The U.S. stock market is considerably smaller now than it was just a few years ago -- a trend that might seem counterintuitive given this year's flurry of initial public offerings.

According to statistics from the World Bank, there were nearly 8,100 publicly traded firms in the U.S. in 1996, the dawn of the dot-com boom. But that number shrunk to a little more than 4,000 at the end of last year.

More companies are staying private for longer. Think about unicorns such as SpaceX, Stripe, Fanatics, and Fortnite developer Epic Games, for example.

And more public companies are choosing to go private. Videogame publisher Electronic Arts just agreed to be bought for $55 billion by a consortium of investors, and there is chatter that the renewable-power firm AES may be bought by BlackRock's General Infrastructure Partners unit for $38 billion. Human-resources software firm Dayforce announced plans in late August to go private while the drugstore chain Walgreens and sneaker maker Skechers recently completed deals to do the same.

Going private, or staying private for longer, has some virtues. Companies can avoid the temptation to manage for the short term, always trying to beat quarterly earnings expectations and raise their financial guidance instead of focusing on the long haul. At the same time, an increase in federal regulations over the past few decades has made it more onerous to be a publicly traded company.

So for all of the talk about the rebound in the IPO market, there seem to be plenty of reasons why existing public companies will no longer want to remain trading on the New York Stock Exchange or Nasdaq.

Investors shouldn't be surprised to see the number of publicly traded companies shrink even further. The EA and Walgreen deals also suggest that buyers are more willing to commit to enormous transactions.

Kyle Walters, a private equity analyst with PitchBook, said in emailed comments to Barron's Monday that the EA deal "officially waves the green flag" on companies "resuming megadeal transactions following several years of fishing" for smaller targets.

"It is also a continuation of a trend seen in take-private activity, where the deals are growing in size," he said.

The expectation of more reductions to interest rates from the Federal Reserve following last month's cut could boost deal activity. Lower rates would make it less expensive to finance acquisitions with debt.

"As interest rates come down from elevated levels over the next few quarters, we expect to see go-private transactions by financial sponsors increase," said e-commerce analysts at Cantor Fitzgerald in a report Wednesday. The analysts suggested that GoDaddy and Instacart, two stocks that are down this year, could be candidates to go private. Neither company immediately responded to a request for comment.

Still, there are limits to the move away from publicly traded status. Others point out that any further "take private" deals are likely to be much smaller than EA, which is the largest leveraged buyout in history at a value of $55 billion.

"Given the unusually large size, we expect the EA deal to be more of a one off," said BofA Securities credit strategist Yuri Seliger in a report Tuesday. Seliger suggested that only about 3.7% of the companies whose debt is rated at investment grade are "feasible LBO candidates."

And make no mistake. For some companies, being a publicly traded company is more alluring than getting bought by a larger entity.

Trevor Burgess, CEO of Neptune Insurance, which made its trading debut on Wednesday, told Barron's that one of the reasons to go public is "to help spread the word and build the brand" for both consumers and investors looking to buy the stock. He added that he isn't interested in making the flood insurer part of a larger carrier. "Part of the reason to go public is to maintain control of the company," Burgess told Barron's.

And while it's only day one for Neptune on Wall Street, the decision to go public has been positive so far. Neptune's IPO was priced at $20 a share, the high end of its range, and the stock ended the day just below $25, a 24% gain from the offering price.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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October 01, 2025 16:27 ET (20:27 GMT)

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