URGENT UPDATE: JPMorgan Chase is making a groundbreaking move by expanding its research capabilities to cover privately held companies, a significant shift in response to evolving market dynamics. This announcement was made on October 20, 2023, as Wall Street grapples with a decrease in initial public offerings (IPOs) and a surge in the influence of private firms.
The financial giant’s first report will spotlight OpenAI, the creator of ChatGPT, highlighting the increasing relevance of private companies in today’s economy. Hussein Malik, head of global research at JPMorgan, stated, “This new offering aims to expand our coverage and research into private companies, where we continue to see growing influence and interest from our clients.”
The timing of this initiative could not be more critical. The median age for a private company to go public has climbed from 6.9 years a decade ago to 10.7 years today, according to data from Morningstar. This trend reflects a broader shift as founders and boards opt to remain private longer, driven by the substantial funding flowing into companies like OpenAI and SpaceX.
Currently, there are an estimated $18.7 trillion in assets within private markets, including venture capital and private equity, and this figure is projected to balloon to $24 trillion by the end of 2029. This influx of capital is reshaping the landscape of investment and economic influence.
Malik emphasized the necessity of understanding these private entities: “With approximately 1,200 private companies in the US achieving unicorn status between 2020 and 2023, their growing influence on the economy and markets is clear.” He added that grasping the impact of private markets is crucial for investors assessing publicly traded companies.
This strategic pivot comes as Jamie Dimon, JPMorgan’s CEO, has voiced concerns about the declining role of publicly traded firms in the American financial system. In a recent letter to investors, he pointed out that the number of public companies in the US has fallen to 4,300 from a peak of 7,300 in 1996, raising questions about the future of market structure.
As JPMorgan embarks on this new journey, investors and analysts alike are keenly watching how this will impact their strategies and the broader market landscape. The urgency of understanding private companies has never been more apparent, and JPMorgan’s initiative is poised to shape investment approaches going forward.
This development is not just a strategic move for JPMorgan; it signals a significant shift in how Wall Street views private companies amid changing economic conditions. Stay tuned for more updates as this story unfolds.
