Where’d all the stocks go?

The stock market is a much less crowded party than it used to be.

Investors had more than 7,500 U.S. stocks to choose from in the late 90s, but the number has more than halved since then. That’s doing a disservice to the typical investor, says Adena Friedman, chief executive officer of Nasdaq, who spoke recently with the AP about how the trend can make income inequality worse.

What’s behind the shrinking number of stocks?

Companies are taking a lot longer and waiting to go public. A big part of the reason is that there are other sources of capital that they can use to drive growth in their companies. Private capital is just incredibly abundant and readily available.

So they have more choice. Then the rules of the government made it possible for them to have more shareholders as a private company than they used to. They weren’t forced into the public market based on just having too many shareholders.

And that’s a bad thing?

The net result is that a lot of what I call average investors — people who are saving for their retirement, who are saving for their education or their kids’ education — those investors don’t get the chance to invest in those companies early in their life. They miss out on the growth and the opportunity that those companies provide.

We always say markets are the most democratic part of the capital market system — any person can come in and invest $100 and find a company that they really want to buy or an ETF or any sort of any investment, and they all have equal access to the markets. That’s not the case for private companies. It’s really reserved for the wealthier parts of society.

Do all these recent high-profile IPOs, like Lyft’s and Uber’s, mean the trend is shifting?

We do have companies that are coming out and going public. But some of them — a lot of the bigger tech companies — are later in their lifecycles. So they’ve already gone through a big growth wave before the public investors get a chance to invest in them.

A lot of IPOs recently have been for money-losing companies, and critics say it’s reminiscent of the dot-com bubble. Is there such a thing as too many IPOs?

No.

I can name some really interesting companies — Intel, Applied Materials, Comcast and Paccar — those four companies went public in our first class of listings, and all of them are in the Nasdaq 100 today. They were not profitable companies, but they were building scalable profitable companies that were changing the world.

I believe that the public market should be for companies to discuss their story, back up their story with facts and figures, fully disclose the risks of the company and let investors decide: Do they have a business model that will grow to profitability, or don’t they?