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TLDR:
- Companies staying private longer is hurting Canada’s productivity
- Private capital is playing a larger role in growing startups
In a trend that has been developing over the past few decades, companies are opting to stay private for longer periods, depriving average Canadians of the opportunity to invest in homegrown success stories. This shift towards private capital is affecting Canada’s productivity and economic growth. In the first quarter of 2024, none of the 15 exit deals in Canada involved an initial public offering, with most deals involving private investors buying public companies. Additionally, the private investors, often from outside of Canada, acquiring these companies reduce the economic boost these companies could have provided if they remained Canadian-owned.
As private markets continue to grow, public markets are stagnating, leaving many companies to stay private for extended periods, or even indefinitely. The rise of private capital markets has shut out middle-class investors from investing in profitable growth periods of companies. This shift also exacerbates income inequality issues by widening the gap between wealthy accredited investors and average individuals.
The decline in public companies has led to a focus on private investing, with pension funds and wealth managers offering new funds for individual Canadian retail investors to access private markets. However, access to private market products remains limited to many retail investors due to high entry points and lack of liquidity compared to public markets.
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