Why companies are turning to private equity
Castle Harlan CEO John Castle argues investors should take a long-term perspective to avoid concerns over the short-term headline risks to stocks.
Companies looking to prosper are having more success in the private equity market, according to Castle Harlan CEO John Castle.
“If you go back to the late 1960s it was an industry that was measured in tens of millions of dollars,” Castle said to FOX Business’ Maria Bartiromo on Friday. “Today it’s measured in $3 trillion, and as a result many speculate as to why has there been a reduction of the number of listed companies on the New York Stock Exchange or other exchanges. One of the reasons is because of private equity.”
Castle, who was the president and chief executive of Donaldson Lufkin & Jenrette, one of the nation’s great investment banks at the time before being acquired by Credit Suisse, said 40 years ago after a company built enough wealth, there were very limited options in terms of diversifying.
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“Your alternatives were extremely limited and one of the primary opportunities was to go public,” he said. “Today you’re able to go into the private equity market and in many, many cases the companies are being bought out in the private equity market as opposed to being taken public.”
And although the stock market has been extremely volatile, the IPO market bounced back in 2018. The momentum carried over into the first quarter of 2019 with some of the largest private tech giants, including Uber, Lyft, Airbnb, Pinterest, Palantir Technologies and Slack, expected to launch initial public offerings this year.