The world’s biggest sovereign wealth fund has sounded the alarm about the lack of stock market listings, arguing that investors could end up owning companies belonging to the past rather than the future.
Norway’s $880bn oil fund is concerned about the reluctance of companies, particularly in the technology sector, to go public with the number of listed US companies having almost halved in the past 20 years.
“You are running the risk of investing only in yesterday’s businesses and technology. It will raise questions for society as a whole in terms of growth,” Oyvind Schanke, chief investment officer for asset strategies at the oil fund’s manager, told the Financial Times.
The oil fund is one of the world’s largest equity investors, owning on average 1.3 per cent of every listed company in the world and 2.5 per cent of each European stock. A report due out next week will recommend whether the fund should increase its current allocation to equities from its current level of 60 per cent.
Mr Schanke said research demonstrated the advantages of encouraging companies to go public.
“Countries with a higher rate of listed companies on average do better in terms of growth. From a public interest point of view, public listing gives you all these benefits. So why is it that more and more companies choose to stay private, particularly large ones in the US?” he asked.
In the UK there have been $3.9bn of new listings from $10bn over the same period last year, according to Dealogic data. This represents the lowest year-to-date level since 2012.
Mr Schanke also expressed concern over recent comments from tech entrepreneurs such as the chief executive of Uber, the ride-hailing app, who said in June that it would “IPO as late as humanly possible — it’ll be one day before my employees and significant others come to my office with pitchforks and torches”.
Another concern of the oil fund is that many of the IPOs that are taking place are companies owned by private equity. “It’s more about exiting than raising fresh capital,” Mr Schanke said.
The oil fund is at present barred from owning stakes in private companies unless they are seeking an imminent listing. Mr Schanke said it was for the owners of the fund — the Norwegian people through politicians and the country’s finance ministry — to weigh what should be in its investment universe.
But he added that there “maybe should be some incentives to being listed such as tax” — adding his voice to those that say the system favours debt over equity.
Some have even argued that the world is seeing a “death of equity” as the amount of stock in circulation is reduced through the likes of takeovers and share buybacks. Andrew Karolyi, professor of finance at Cornell University, told an audience at the oil fund on Tuesday that the precipitous decline in listed US companies was almost as much to do with the number of groups that had delisted as with those that had not listed. The biggest contributor to that was mergers, he added.
Mr Schanke said that there were a “multitude of reasons” as to why fewer companies were listing. Previously, the fund’s chief executive has warned that regulation was overburdening the boards of public companies and giving an advantage to private groups.
Additional reporting by Thomas Hale
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