Why Private Companies Stay Private: The Structural Forces Behind the Public Market Exodus

Private companies stay private for four main reasons: the cost of being public has risen sharply since the early 2000s, private capital is now abundant enough to fund growth that previously required an IPO, founders prefer the operational freedom of private ownership, and secondary markets now provide enough liquidity that early shareholders no longer need a listing to cash out. The result is a structural shift in where global value creation happens. The number of US-listed companies has fallen from around 7,500 in 1996 to roughly 3,900 today, while private market assets under management have grown to over US$13 trillion globally.

The forces driving companies to stay private are structural rather than cyclical, and they reinforce each other over time. For Australian investors specifically, the implications are sharper than most realise, because the shrinking pool of listed equities collides with a superannuation system that has grown too large for the market it was originally designed to invest in.

This article explains why the shift happened, why it persists, and what it means for how individual wholesale investors should think about their portfolios.

The data: how dramatic the decline has actually been

The US listing decline is the most documented but also the most misunderstood. The often-quoted figure is that US public companies have halved since the mid-1990s. The precise numbers depend on which source you consult.

Carnegie Mellon University research puts the peak at approximately 7,500 publicly listed US firms in 1996, declining by roughly 50% over the following two decades. SEC data analysed by The Corporate Counsel shows total reporting issuers fell from 9,656 in 2004 to 7,902 in 2024, with US-domiciled exchange-listed companies declining from 4,461 to 3,929 over the same period. The Columbia Blue Sky Blog analysis found a US listing gap of approximately 3,514 companies, meaning that based on financial and economic development metrics, the US should have substantially more listed companies than it actually does.

The decline is concentrated in the US rather than global. Over the same period that US listings fell, non-US listed companies grew from 26,401 in 1996 to 34,274 by 2017. The listing decline is structurally concentrated in the US, with the UK and Australia showing similar patterns at smaller scale.

The Australian context tracks the US pattern. The ASX is currently shrinking for the first time since 2005. Recent delistings include Sydney Airport, AusNet Services, Crown Resorts, OZ Minerals, and Tassal Group, removing approximately A$65 billion in market capitalisation. Origin Energy and others remain in the pipeline. New IPO activity has not kept pace with delistings, leaving the listed equity universe in Australia structurally smaller than it was five years ago.

Four reinforcing forces explain why the trend persists and why a reversal is unlikely.

The rising cost of being public

The financial cost of operating as a publicly listed company has risen materially since the early 2000s. Three regulatory shifts drove most of the change.

The Sarbanes-Oxley Act of 2002, introduced after the Enron and WorldCom scandals, imposed extensive internal controls and financial reporting requirements on US public companies. The June 2025 GAO report on Sarbanes-Oxley compliance costs found that while compliance costs scale higher in absolute dollars for large companies, they hit smaller public companies harder proportionally. Audit fees spike approximately 13% when firms lose their exemptions from certain compliance requirements. SEC research cited in the same report found that, on average, 12% of recurring incremental costs of being a public company go to regulatory compliance unrelated to Sarbanes-Oxley itself.

Industry benchmarks suggest annual Sarbanes-Oxley compliance costs alone now range from approximately US$500,000 to US$5 million for public companies, with first-year costs typically two to three times higher than ongoing annual costs due to documentation and process design requirements. These figures don't include the broader regulatory burden of public company reporting (quarterly filings, proxy statements, ongoing disclosure obligations) or the legal and advisory costs of remaining compliant.

The qualitative cost matters too. Public company management teams spend material time on quarterly earnings preparation, analyst calls, and investor relations rather than operating the business. For founders building rapidly growing companies, the time tax is often a more important constraint than the financial cost. The Carnegie Mellon model concluded that an increase in the cost of operating as a public company, combined with improved private financing availability, can quantitatively explain the post-1996 decline in US listings.

The directional conclusion is clear. Going public has become more expensive in financial, operational, and managerial terms over the past two decades, and the increase has been particularly burdensome for smaller and faster-growing companies. This is precisely the cohort that historically generated the most listing growth.

The abundance of private capital

The second force is the opposite side of the same equation. While the cost of being public has risen, the cost of staying private has fallen, because private capital is now available at scale that simply did not exist a generation ago.

Global private equity assets under management have grown from approximately US$580 billion in 2000 to over US$13 trillion today, with projections running as high as US$65 trillion by 2032 in some analyst forecasts. Venture capital, growth equity, sovereign wealth funds, and family office capital have all expanded in parallel. A company that needed a US$100 million capital raise twenty years ago might have had little choice but to go public. Today, that same company can choose between dozens of private capital sources offering similar economics without the listing burden.

The data on company age at IPO illustrates the effect. In 1999, the median age of a US technology company at IPO was four years. Today, it is approximately twelve. Companies are reaching mature scale (often US$500 million or more in annual revenue) before listing, because they no longer need public capital to fund the growth that gets them there.

This is the explanation behind the most-cited statistic in private markets: that the majority of value creation in modern technology companies now happens before listing. When companies IPO at US$500 billion or US$1 trillion valuations, as SpaceX and OpenAI are expected to, the public market investor is buying what is effectively a mature business, not the early-stage compounding that historically rewarded IPO participants. The early growth has been captured by the private market investors who funded the company before the public got access.

Founder control and operational freedom

The third force is structural but often underweighted in academic analyses: founders prefer staying private because it preserves control.

Public company shareholders demand quarterly earnings, defendable strategy explanations, and predictable financial results. Boards become populated by institutional investor representatives. Activist investors emerge once any operational weakness becomes visible. Compensation gets benchmarked and contested. Strategic pivots require shareholder communication that can leak competitive information.

For founders running rapidly evolving companies, these dynamics introduce friction that compounds over time. Private ownership allows founders to make decisions on technology architecture, hiring, geographic expansion, and capital allocation without public scrutiny. SpaceX's choice to operate without public quarterly reporting while building Starship is a clean example. Many of those decisions would have been extremely difficult to defend to public market analysts looking at near-term cash burn.

The rise of dual-class share structures (which give founders disproportionate voting rights even after listing) reflects the same preference. Meta, Alphabet, Snap, and Palantir all listed with dual-class structures that preserve founder control. The fact that companies feel the need to engineer these protections into their listing structures is itself evidence of how seriously founders take the loss of operational autonomy that public listing typically involves.

For the most ambitious founders building generational businesses, staying private has become the default choice for as long as private capital can fund their growth. The decision to IPO has shifted from a near-mandatory step toward institutional scale to an active choice made only when other factors (employee liquidity, capital structure rebalancing, regulatory pressure) make it more attractive than the private alternative.

Secondary markets and the end of liquidity pressure

The fourth force is the one that most cleanly explains why companies have been able to stay private for as long as they have. Historically, the principal pressure to list came from existing shareholders (early employees, venture investors, founders themselves) who needed an exit. The public listing was the liquidity event that converted paper wealth into spendable capital.

Secondary markets have removed most of that pressure. Companies like SpaceX, OpenAI, Anthropic, and Stripe now conduct organised tender offers every 12 to 24 months, allowing employees and early investors to sell shares without the company needing to list. Platforms like Forge Global, Hiive, and EquityZen facilitate ongoing secondary trading at meaningful scale. Australian wholesale investors can access these same secondary structures through platforms like NonPublic, which sources shares from existing holders and structures them into SPVs.

The economic effect is that early-stage capital providers no longer require an IPO to realise gains. Venture capital firms can return capital to their limited partners through secondary sales. Founders can extract personal liquidity through structured tender offers. Employees can sell vested shares without waiting for a listing.

This matters because liquidity pressure was historically the single most important reason companies went public when they did. Remove that pressure, and the timing of any listing becomes entirely strategic rather than necessary. Companies can list when conditions favour them, not when their shareholders demand it. Many have concluded that those favourable conditions never materially arrive.

The Australian implication: an institutional capacity problem nobody is solving

This is where the global story has a sharper Australian edge that has been undercovered in most public discussion.

Australia has a A$4.3 trillion superannuation system and an ASX with a total market capitalisation of around A$2.6 trillion. The math is unforgiving. Even with significant offshore allocation, Australian super funds collectively own a meaningful share of the listed Australian equity market, and that share is approaching the ceiling of what is practical. Deloitte's Dynamics of the Australian Superannuation System report has flagged super fund capacity issues that would only intensify if funds tried to retain current ASX allocation percentages as the system continues to grow.

The structural problem is this. Super fund inflows from compulsory contributions continue regardless of where investment opportunities exist. Inflows must be deployed somewhere. As the ASX shrinks and the super system grows, the imbalance between Australian capital and Australian listed equities becomes more acute. The funds respond by allocating more to international markets and to unlisted assets, but neither option is unconstrained. International allocation introduces currency exposure and concentration in US mega-caps. Unlisted asset allocation requires the kind of due diligence infrastructure that not all super funds maintain at scale.

For individual wholesale investors, the structural argument runs in their favour. The same conditions that make life difficult for Australian super funds create unusual opportunities for smaller pools of capital. Where institutional capital cannot deploy efficiently into mid-sized private market deals, because cheque sizes are too small to move the needle on a A$300 billion balance sheet, individual wholesale investors operating through structured platforms can access exactly that opportunity set.

The asset class is genuinely the same. The companies are the same. The structures are similar. What differs is the cheque size that makes participation efficient. For an investor deploying A$50,000 to A$5 million across private market opportunities, the same private companies that institutional capital struggles to access at scale are perfectly sized for individual portfolio allocation. The structural mismatch between Australian super capacity and Australian listed equity supply is not getting solved at the institutional level, which leaves the opportunity open at the wholesale investor level.

What this means for individual wholesale investors

Three implications follow from the structural analysis above.

Allocation matters more than it used to. If global value creation now happens predominantly in private markets, then portfolios concentrated exclusively in listed equities are systematically excluded from a meaningful portion of where wealth gets built. The historical justification for ignoring private markets, that the illiquidity premium isn't worth the lock-up, becomes harder to defend when the alternative is excluding most of the high-growth technology, defence, and AI companies of the next decade.

Access has expanded considerably. The structural shift toward private markets has been accompanied by an expansion of access infrastructure that did not exist a decade ago. Platforms like NonPublic (operating under Australian Financial Services Licence #482668) provide Australian wholesale and sophisticated investors with curated access to private companies including SpaceX, OpenAI, Anthropic, and Anduril through SPV structures. The opportunity that family offices have been quietly capturing for the past five years is now accessible to individual qualified investors.

Patience is the third requirement, and it remains the hardest part for many investors. Companies staying private longer means the holding period for any specific position has extended. An investor entering an SPV today should plan for capital to remain committed for three to seven years before a liquidity event, depending on the company and the timing of any eventual IPO or acquisition. This extended time horizon is intrinsic to private market investing, and it requires deliberate portfolio sizing to avoid liquidity stress.

For individual wholesale investors who can absorb the time horizon and meet the eligibility requirements under the Corporations Act 2001, the structural argument for private market exposure has rarely been stronger. Companies that historically would have IPO'd at US$5 billion are now IPO'ing at US$500 billion, after the majority of the value has already been created. For investors who want exposure to that growth, the meaningful decision is how to participate deliberately and at appropriate scale, rather than whether to participate at all.

Wholesale investors interested in understanding which opportunities are currently available can book an introduction call with our team, or read our 2025 Private Markets Landscape report for a broader view of the asset class.

NonPublic Pty Ltd (ABN 49 607 216 928) holds Australian Financial Services Licence #482668. Investments are available to wholesale and sophisticated investors as defined under the Corporations Act 2001. This content is general in nature and does not constitute financial product advice. It does not take into account your objectives, financial situation, or needs. Investing in private markets involves significant risk, including the potential loss of your entire investment. Past performance is not a reliable indicator of future results. You should obtain independent financial advice before making any investment decision.