- Bernstein analysts questioned the purpose of the stock market and their findings make stark reading.
- The charts below show how expected returns from equities may well be lower in future as companies IPO later, meaning less value for public investors is created.
- Similarly, the number of IPOs in the US by loss-making companies such as Uber and Lyft now stands at 80%.
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The makeup of companies going public in the US has fundamentally changed, and it's making life increasingly difficult for investors.
Statistics show that US companies are going public later than they previously did. And fewer businesses are taking the option to IPO than in the past. On top of that, more companies that are loss-making are going public - around 80% according to Bernstein - meaning there is less potential value creation for shareholders. Lower returns on equity can be expected as a result, Bernstein suggests.
Also read: Investing in Uber? Here's why one tech banker says not to hold your breath for big returns
"The decision to list later or not at all means that the potential for large returns in public equity from the relatively early high-growth stage of companies is diminished, and this is happening at the same time that the asset price inflation of the last 35 years means that aggregate market returns are likely to be lower as well," according to analyst Inigo Fraser-Jenkins and his team at Bernstein.
Here's how the stock market has changed, according to the note: