What’s going on?

The global supply of publicly listed stocks (meaning the size of new shares issued, minus that of shares bought back) is shrinking at its fastest pace in at least 25 years (JPMorgan)

What does this mean?

• So far in 2024, the stock supply has already shrunk by $120bn – much bigger than the $40 billion decline in 2023 as a whole.
• This puts the metric on track to get worse for the 3rd year in a row, a run that hasn’t happened since the bank started tracking in 1999.

Why should I care?

The bigger picture: The situation is quite adverse

• If the stock markets are rising, companies should be encouraged to sell shares at higher prices, rather than buying them back. The opposite situation might then reflect the current climate.
• (i) Uncertainty over potential interest rate cuts and (ii) the upcoming presidential election seem to have businesses being more cautious, putting them off from selling new shares. Moreover, companies are struggling to push up their sales now that customers are budgeting, so they might be buying back their own stocks to lift their EPS.

Zooming out: Maybe staying private isn’t that bad

• There were more than 7,000 publicly listed companies in the US before 2000, but that number has now fallen below 4,000.
• That has a lot to do with the increasing sizes of PE and VC, who give smaller companies the opportunity to raise funds without dealing with the financial and regulatory burdens that come with going public.

Content source: 
1. Finimize (2024) Out Of Stocks. https://finimize.com/content/out-of-stocks [Accessed on Apr 15, 2024]