Companies staying private, rational apathy

This episode explores the evolving landscape of corporate finance and governance, specifically addressing the increasing trend of companies remaining private despite achieving significant scale. Against the backdrop of the Securities Act of 1933 and the Exchange Act of 1934, the hosts discuss how legal loopholes and regulatory changes have broadened the definition of "private sale," allowing companies to raise substantial capital without the burden of public disclosure. More significantly, the discussion reveals that the primary reasons for going public are no longer capital acquisition but rather insider cash-out opportunities and the need for publicly valued stock for acquisitions. For instance, the implosion of WeWork highlighted the risks associated with the lack of transparency in private markets. The conversation then pivots to "rational apathy," examining why many shareholders, even institutional ones, choose not to vote, despite their ownership stake. This apathy, the hosts argue, stems from the costs associated with becoming informed about voting issues and navigating the voting process itself. Ultimately, the episode underscores the growing concern over decreased economic transparency and the potential for market instability resulting from the proliferation of large, privately held companies.