For the past 25 years, America has been plagued by a troubling trend. The number of publicly traded companies in the U.S. has fallen by 43 percent, while the number of sponsor-backed private firms has surged fourfold. There are now 2.5x as many private equity-owned companies as public ones. Meanwhile, public markets in countries around the world—including key economic competitors—are booming. The number of publicly traded companies globally has grown by nearly 35 percent.
These are symptoms of deeper problems facing American businesses: rising costs, regulatory overreach, and a lack of transparency. Instead of being empowered to grow and innovate, too many companies are being squeezed by calcified systems in the states where they incorporate and the exchanges where they list.
The strength of our capital markets—and our broader economy—depends on reversing this trend and restoring a truly pro-business system. That shift is already underway in Texas, where bold, bipartisan reforms have recently been passed. These reforms will reshape the financial and regulatory landscape not only in our state but across the country. The Texas Capital Markets package promotes strong corporate leadership, combats shareholder proxy abuses, and prohibits taxation on securities transactions—a stark contrast to initiatives in states like New York, where lawmakers are pushing to reinstate a tax on stock transfers that would stifle market activity, and recent court decisions in Delaware that undermine corporate governance.
The reforms passed in Texas will boost business confidence and help bring down costs. Take, for example, the problem of shareholder proxy votes. Currently, public companies are inundated with far-fetched ideas from a small group of activists seeking to push agendas unrelated to business performance. Some of these investors hold as little as $2,000 in shares!
While such proposals rarely pass, they are costly and time-consuming—distracting leadership from long-term value creation. A Business Roundtable survey found that over three-quarters of their member companies spend more than 100 hours a year managing these proposals, with some small-caps incurring $500,000 or more in external costs.
SB 1057, signed into law by Texas Gov. Greg Abbott in May, addresses this problem by requiring a shareholder to have a meaningful stake in a company to force a vote on a proposal—$1 million or 3% of voting shares—to help shield public companies from this expensive nuisance.
To qualify for the benefits of this new Texas law, a publicly traded company must be incorporated in Texas and either headquartered in Texas or listed on an exchange that is headquartered in Texas and approved by the state’s Securities Commissioner under specific requirements of the Texas Securities Act. We believe this will tip the scales toward Texas for many companies, and the Texas Stock Exchange (TXSE) has proudly advocated for this change, along with the broader package of reforms, since day one.
We have spent years listening to corporate executives who are frustrated with the current system and want a new alternative. Many are weary of shifting governance standards that the legacy exchanges attempt to impose without shareholder consensus or congressional mandate. Public listings have become too costly and unpredictable. Today, companies spend as much as $100 million or more to go public and between $5 million and $25 million annually to remain public. This has led CEOs across the country to reach the same conclusion: The legacy exchanges do more to them than for them.
TXSE is committed to aligning with issuers on their priorities rather than chasing ideological fads. Bringing competition to the listings duopoly will incentivize more companies to access public capital, encourage more households to invest in the success of American businesses, and ensure our public markets remain engines of long-term growth.
Dallas has earned itself the dubious nickname “Y’all Street” as shorthand for this convergence of pro-business principles and influx of finance professionals from JPMorgan, Goldman Sachs, and yes, the Texas Stock Exchange. Quite frankly, at TXSE, we look past detractors and dismissals and down to the cold, hard truth: The center of gravity of American capitalism is shifting.
There's a reason that Abbott calls Texas an "economic juggernaut." Companies across the world are realizing all that our great state has to offer. We look forward to celebrating their listings on the Texas Stock Exchange in the next year, the next decade, and beyond.
