Dear Reader,
This is Dylan Jovine with Behind the Markets.
Happy Thursday.
Today is Thursday, April 16th.
And today I want to talk about something big:
One thing that has changed dramatically since I started on Wall Street 35 years ago is the staggering drop in public companies.
Since the late 1990s, the number of publicly traded companies has dropped by 50%.
When I started in this business in the early nineties, there were around 14,000 publicly traded companies.
Today there are roughly 5,000 to 6,000.
Half as many places to put your money.
Why Companies Are Staying Private
The founders and executives I talk to are pretty direct about it.
The juice ain't worth the squeeze.
A big part of that is litigation.
After Enron and WorldCom, Congress passed the Sarbanes-Oxley Act, which put such onerous regulations on public companies that even an honest mistake can result in massive legal exposure.
But it gets worse than that.
If a company's stock drops — for any reason — trial lawyers can file what we call stock drop lawsuits.
These are often meritless suits that have nothing to do with actual fraud.
The lawyers just see a falling stock price and smell a settlement.
So a company can face a direct fraud claim over underlying conduct AND a separate lawsuit just because the stock went down.
They pay twice for the same alleged wrong — whether either claim has merit or not.
It's basically a legal shakedown.
And it has driven a lot of great companies out of the public markets entirely.
What This Does to Valuations
Here's the unintended consequence.
Fewer public companies means fewer places for investors to put their money.
And when you shrink the supply of investable assets while demand stays constant, prices go up.
This is part of why you see such outrageous valuations on publicly traded stocks today.
It's not just hype — there are simply fewer options.
The Opportunity This Creates
The flip side of this is real.
If the best companies are staying private longer, that's where some of the most compelling opportunities are.
It's actually exactly why we started Hidden Market Profits.
We saw massive opportunities in companies not yet public — businesses on the path to either going public or getting acquired — and we've been very active in that area.
What We Look For
I want experienced managers.
I don't want to hand the keys to the car to someone who doesn't know how to drive it.
I want someone who understands the battlefield of their industry and knows how to solve a big problem for their customers.
I want companies with real traction — companies already selling things, not just pitching ideas.
And I want anchor investors — serious money already committed from people who know what they're doing.
A Company That Has All Three
We've been talking about one in Hidden Market Profits recently, and I'm genuinely excited about it.
It's a defense contractor that reminds me a lot of a young Palantir.
They already have contracts with the Space Force and the Air Force.
And here's something that puts their work in context.
In the first 30 days of operations in Iran, we hit more targets than we did during the entire Shock and Awe campaign of the 2003 Gulf War.
That is not a coincidence.
That is AI and machine learning picking targets and executing at a speed and scale that simply wasn't possible before.
Some reports say we've actually run low on ammunition — that's how fast and hard we hit.
The pace of modern warfare is accelerating, and software is at the center of it.
This private company is one of a handful helping us pioneer 21st century warfare.
In the nineties, a company like this would have been public.
Today it isn't.
And that's exactly the kind of opportunity Hidden Market Profits was built to find.
If you're a Hidden Market Profits member, I urge you to check out our report on this one.
Anyway, that's all I have today.
I will speak to you tomorrow.
“The Buck Stops Here,”
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Written by Dylan Jovine