Gt Wakeup Call

Capital Markets Series

A wake-up call for America

By David Weild and Edward Kim

November 2009

A study of systemic failure in theU.S. stock markets and suggestedsolutions to drive economic growth

There is a depression in U.S. stock markets,evidenced by the precipitous decline in the numberof publicly listed companies. This is not a globalphenomenon; the United States is seriously laggingother industrialized nations in the formation of such“listed” companies. The culprit is changes to marketstructure that have inhibited economic recovery,impaired the job market and undermined U.S.competitiveness.The problem is dire, but solutions are attainable.We can fix market structure to support the IPO andlisted markets and to drive growth — and Congressand the SEC can lead the way toward adding billionsin tax revenue to the U.S. Treasury without costingtaxpayers a dime.

The data used in this report has not, to the best of our knowledge, beencompiled previously in this form. It comes from a number of sources, includingthe World Federation of Exchanges, and from direct interaction with majorstock exchanges.

Contents

1 Executive Summary4 The Great Depression in Listings6 U.S. Markets in Crisis10 Faltering U.S. Stock Market14 U.S. Compared to Other Developed Nations19 The Great Delisting Machine25 Harm to the U.S. Economy29 Recommended Solutions32 Appendices:1: Global Listing Trends Indexed to 19972: Innovators3: Alternative Public Offerings38 About the Authors39 About Grant Thornton LLP41 Offices of Grant Thornton LLP

A wake-up call for America

1

Executive Summary

This study explores what the authors term “The GreatDepression in Listings,” the precipitous decline over the lastdecade in the number of publicly listed companies in theUnited States. It discusses the impact of this decline on the U.S.economy and competitiveness, offers solutions, and advocatesurgent attention by the Obama Administration, Congress andthe U.S. Securities and Exchange Commission (SEC) to improvethe functioning of both public and private stock markets sothey can once again support U.S. economic growth.The study is based on a thorough analysis of global stockmarket listings by authors David Weild and Edward Kim,Capital Markets Advisors at Grant Thornton LLP, using datafrom a number of sources, including the World Federationof Exchanges, and from direct interaction with major stockexchanges. The data used in this report has not, to the best of the authors’ knowledge, been compiled previously in this form.The study demonstrates that changes to market structureover the last 10 years have had a severe negative effect on thenumber of publicly listed companies in the United States.

1. Problems in market structure are underminingthe United States’ global competitiveness.

•TheUnitedStateslistedmarketsareinseculardecline

(based on declines in the number of listed companies).— Since 1991, the number of U.S. exchange-listedcompanies is down by more than 22% and downa startling 53% when allowing for real (inflation-adjusted) GDP growth.— Since 1997 — the peak year for U.S. listings —this number has declined by nearly 39%(55% when allowing for real GDP growth).

Since peaking in the mid-90s, the number of exchange-listed companies has declined dramatically in the U.S.,especially when adjusted for real GDP growth.

The Great Depression in U.S. Listings

Source: Capital Markets Advisory Partners, World Federation of Exchanges, individual stock exchanges,USDA Economic Research Service (GDP in 2005 US$). Excluding funds.

Number of ListingsPercent Change1991

–

2008Number of ListingsPercent ChangePeak Year

–

2008

1991

2008

Actual GDP Adjusted Year Peak Actual GDP

Adjusted

NASDAQ 4,094 2,952(27.9)% (56.2)%1996 5,556(46.9)% (62.2)% NYSE 1,989 1,963(1.3)% (40.1)%1998 2,592(24.3)% (43.0)% AMEX 860 486(43.5)% (65.7)%1993 889(45.3)% (64.8)% ALL 6,943 5,401(22.2)% (52.8)%1997 8,823(38.8)% (54.5)%

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