Stock and Flows of Publicly Traded Companies (Report)
| Stock and Flows of Publicly Traded Companies (Report) | |
|---|---|
| Project Information | |
| Has title | Stock and Flows of Publicly Traded Companies (Report) |
| Has owner | Will Cleland |
| Has start date | |
| Has deadline date | |
| Has project status | Tabled |
| Has sponsor | McNair Center |
| Copyright © 2019 edegan.com. All Rights Reserved. | |
Contents
To Do List
What are the returns of every stock in the data set over time? How do the returns of the merged/acquired stocks differ from others?
AUM of PE over time alongside market cap of NYSE, NASDAQ, AMEX with a breakdown of operating companies and financial companies.
Breakdown of why companies are delisting using SDC data
Breakdown of where companies are going using SDC data (Financial acquirers vs. integration) PE as a subset of financial acquirers
Do we want to look at another element by using VenturExpert to determine where are the startups going? IPO? Buyout? Failure?
the story of a company bought and sold 7 times by PE co. for the report.
Hypothesis:
It is more efficient to have PE than public markets, but this comes with flaws, how does your average investor access the market, what does a PE bubble look like, does this stifle or improve innovation?
Done List
Use permno as a key for CRSP
Use every month to create delist codes
redo graphs
Pull Compustat data on Sales, TA, ... for merge with CRSP based on GVKEY
Create Graph of trusts, REITs, and other investment vehicles over time
IPOs per year
Add stock ownership code to data
Rework data so that it has groups for regional, ANN, and OTC
Re-do the previous work in the listing gap- Thus, in a given year, we exclude: records that are not U.S. common stocks (Share Codes 10 and 11); stocks not listed on the AMEX, NASDAQ, or NYSE (Exchange Codes 1, 2, and 3); and, investment funds and trusts (SIC Codes 6722, 6726, 6798, and 6799) - graph with and without SIC codes
Link to "The U.S. Listing Gap" PDF - http://www.nber.org/papers/w21181.pdf
DROP the shares outstanding graph
Foreign headquarters add to data
Notes
IPO data from Compustat is poor. Not every company has an IPO date and there could be selection bias if compustat removes companies.
The money flowing into PE continues to go up https://www.preqin.com/docs/reports/2016-Preqin-Global-Private-Equity-and-Venture-Capital-Report-Sample_Pages.pdf
Delisting in the NASDAQ was terrible in 1998 a lot of small businesses went down. Validates CRSP data http://articles.latimes.com/1998/nov/02/business/fi-38584
Delisting Codes here http://www.crsp.com/products/documentation/delisting-codes
Lit Review
lit review from economist article-
According to Preqin, a London-based research house, there were 24 private-equity firms in 1980. In 2015 there were 6,628, of which 620 were founded that year (see chart 2).
In America, for which there are good data, the number of banks peaked in 1984; of mutual funds in 2001; companies in 2008; and hedge funds, probably, in 2015. Venture-capital companies are still multiplying; but they are effectively just private equity for fledglings.
IS THE DECLINE IN COMPANIES PUBLIC AND PRIVATE OR ONLY PUBLIC?
According to Bain, a management consultancy, in 2013 private-equity-backed companies accounted for 23% of America’s midsized companies and 11% of its large companies.
Only half of the world’s private-equity firms, and 56% of their funds’ assets, are American. A quarter of private-equity assets are in Europe. There are funds in Barbados, Botswana, Namibia, Peru, Sierra Leone and Tunisia.
Today rates can hardly go any lower, and should eventually rise. This is one of the reasons Mr Schulte and others see little growth to come.
The political environment, too, may be changing. The industry benefits from two perverse aspects of the tax code—the incentive it provides for loading up companies with debt, and the reduced rate of tax the general partners benefit from owing to most of their personal income being taxed at the rate applied to capital gains. There are strong arguments for reform under both heads. In the second of the two cases a change looks quite likely.
UNLIKELY WITH TRUMP
There is also a broader political risk, identified in a paper published in January by professors at New York University and the Research Institute of Industrial Economics, a Swedish think-tank, called “Private Equity’s Unintended Dark Side: on the Economic Consequences of Excessive Delistings”. As companies shift from being owned by public shareholders to private-equity funds, direct individual exposure to corporate profits is lost. The public will become disengaged from the capital component of capitalism, and as a consequence will be ever less likely to support business-friendly government policies.
IT’S BEEN DONE
PRIVATE EQUITY ALSO GETS COMPETITION FROM ENDOWMENTS AND SOVEREIGN WEALTH FUNDS WHO WANT TO INVEST DIRECTLY
The “internal rate of return” measure that private-equity companies tout can be fudged. This makes academic assessments of performance hard.
This July, in an update of a previous study*, business-school professors at the Universities of Chicago, Oxford and Virginia found that, although in recent years buy-out funds had not done much better than stockmarket averages, those raised between 1984 and 2005 had outperformed the S&P 500, or its equivalent benchmarks in Europe, by three to four percentage points annually after fees. That is a lot. Ludovic Phalippou, also of Oxford, is more sceptical; he argues that when you control for the size and type of asset the funds invest in, their long-term results have never looked better than market-tracking indices. That said, getting the same size and type of assets by other means is not easy.
The average return, disputed as it may be, does not tell the whole story. Studies find some evidence that private-equity managers who do well with one fund have been able to replicate their success (though again the effect seems to have decreased in the past decade). The biggest inducement to invest may simply be a lack of alternatives. Private equity’s current appeal rests not on whether it can repeat the absolute returns achieved in the past (which for the big firms were often said to be in excess of 20% annually) but on whether it has a plausible chance of doing better than today’s lacklustre alternatives. This is a particular issue for pension funds, which often need to earn 7% or 8% to meet their obligations. The standard explanation for why private equity might be expected to outperform the market is that it can ignore the dictates of “quarterly capitalism”—meaning impatient investors. This is not particularly convincing. The people who work for private-equity firms are a caffeinated bunch. During volatile times they often require constant updates on their portfolio companies’ results, and can intervene to quash even the most trivial use of cash.
Bloomberg View
Also references a paper that was what I wanted to cover.
According to figures published in The Economist, one in four mid-sized firms and one in ten large firms in the U.S. are under PE ownership as of 2016, with one PE firm (Carlyle) employing 725,000 people, second only to Walmart.6
After rising from below 10% of taxpayers at the end of World War II to a high of 26.4% in 2000, stock market participation has fallen to 18.6% in 2014 (the latest year for which data are available).7
Buyouts have, for example, been shown to lead to sizable improvements in accounting profits (Kaplan 1989), management 6 practices (Bloom, Sadun, and van Reenen 2015), productivity (Lichtenberg and Siegel 1990, Harris, Siegel, and Wright 2005, Davis et al. 2014), and innovation (Lichtenberg and Siegel 1990, Lerner, Sørensen, and Stromberg 2011).
M&A Rate is the cause of it all but other interesting questions remain-
https://www.bloomberg.com/view/articles/2015-03-17/world-has-a-deficit-of-high-quality-debt
Private Equity’s Unintended Dark Side: On the Economic Consequences of Excessive Delistings∗ Alexander Ljungqvist New York University, NBER, CEPR, and IFN Lars Persson Research Institute of Industrial Economics (IFN) and CEPR Joacim Tag˚ Research Institute of Industrial Economics (IFN) November 23, 2016
Exchange Codes http://finabase.blogspot.com/2014/09/interantional-stock-exchange-codes-for.html
IPO Data https://site.warrington.ufl.edu/ritter/ipo-data/
IPO historic underpricing https://site.warrington.ufl.edu/ritter/files/2016/02/Initial-Public-Offerings-Underpricing-2016-01-08.pdf
IPO historic underwriting fee https://site.warrington.ufl.edu/ritter/files/2016/03/Initial-Public-Offerings-Underwriting-Statistics-Through-2015-2016-03-08.pdf 7% Monopoly
IPO historic returns https://site.warrington.ufl.edu/ritter/files/2016/03/Initial-Public-Offerings-Updated-Statistics-on-Long-run-Performance-2016-03-08.pdf
IPO Rate http://www.renaissancecapital.com/ipohome/press/ipopricings.aspx
Cool map of global market cap http://www.marketwatch.com/story/heres-the-map-of-the-world-if-size-was-determined-by-market-cap-2015-08-12
