In 1988, Michael Dell was a 23-year-old wunderkind who sold cheap computers directly to “end users,” which is what he called his customers. He arranged an initial public offering to raise cash and attract top-tier engineers and managers while basking in the light of transparency.
Dell was so small that the IPO wasn’t mentioned in the New York Times. At around $12 million, or $23 million in 2013 dollars, the book value of Dell’s common stock likely would have been too low to entice a modern-day Goldman Sachs, one of its lead underwriters. But Dell’s IPO was a winner. In two months, its stock price jumped from $8.50 to $19 per share. By the end of the year, it had made $159 million in sales.
Last week, Dell announced a stunning $24.4 billion leveraged buyout. If the plan manages to survive, it will allow Dell to reboot his ailing company free from the public glare. The deal is the largest of its kind since 2008, but it’s also notable because it marks the waning of the public company era.
Public companies built railroads, cars, fast-food empires, cheap PCs and many goods and services that Americans still consume. For decades, a company like Dell could take a chance at being publicly traded in exchange for an influx of cash. But if Michael Dell were starting out today, he probably wouldn’t take his company public.
The number of public companies listed on U.S. exchanges dropped to 4,977 in 2012 from a peak of 8,823 in 1997, according to the World Federation of Exchanges. The number of IPOs fell, too. A September paper released by the Securities and Exchange Commission’s Advisory Committee on Small and Emerging Companies reports that from 1980 to 2000, there were, on average, 311 IPOs a year. That number has decreased to an average of 99 a year since 2001.