FOR most of the past 150 years public companies have swept all before them. Wall Streeters have dissolved their cosy partnerships to go public. Communists have abandoned their five-year plans in favour of stockmarket listings. And Silicon Valley entrepreneurs have bowed before the god of the IPO--the initial public offering that takes a start-up public and makes its founders rich. But is the sun finally setting on the public company?
FOR most of the past 150 years public companies have swept all before them. Wall Streeters have dissolved their cosy partnerships to go public. Communists have abandoned their five-year plans in favour of stockmarket listings. And Silicon Valley entrepreneurs have bowed before the god of the IPO--the initial public offering that takes a start-up public and makes its founders rich.
But is the sun finally setting on the public company?
The result has been a revolution among small and mid-sized businesses in America. Larry Ribstein, a professor of law at the University of Illinois, calculates that about a third of American businesses large enough to file tax returns are now organised as partnerships or what he calls "uncorporations". Plenty of big businesses, too, are shunning the stockmarket, with its costly reporting requirements and impatient investors. Publicly traded partnerships and real-estate investment trusts mix and match features from corporations and uncorporations. Many big firms, such as Alliance Boots (a health-and-beauty group) have abandoned public stockmarkets and embraced private equity. The most fashionable investment vehicles--leveraged buy-out firms, hedge funds and venture-capital funds--are spearheading the "uncorporate" revolution. These firms are usually organised as partnerships, though some, such as the Blackstone Group, are also listed. Corporate raiders often raise money by creating funds in the form of partnerships. Their targets are often restructured as partnerships.
The result has been a revolution among small and mid-sized businesses in America. Larry Ribstein, a professor of law at the University of Illinois, calculates that about a third of American businesses large enough to file tax returns are now organised as partnerships or what he calls "uncorporations". Plenty of big businesses, too, are shunning the stockmarket, with its costly reporting requirements and impatient investors. Publicly traded partnerships and real-estate investment trusts mix and match features from corporations and uncorporations. Many big firms, such as Alliance Boots (a health-and-beauty group) have abandoned public stockmarkets and embraced private equity.
The most fashionable investment vehicles--leveraged buy-out firms, hedge funds and venture-capital funds--are spearheading the "uncorporate" revolution. These firms are usually organised as partnerships, though some, such as the Blackstone Group, are also listed. Corporate raiders often raise money by creating funds in the form of partnerships. Their targets are often restructured as partnerships.
Labeling the re-creation of Gilded Age Version 1 financial games as "innovation" is, indeed, part of the defense mechanism of an obsolete system against creative destruction, but defenses like those are like levies built of sand: they work until the flood comes. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
