The number of companies listed on the Australian stock market is shrinking, swallowed up by less transparent private equity, and regulators are asking themselves what to do about it.
In two years, InvoCare funerals, aged care operator Estia Health, Sydney Airport, realtor McGrath, drilling company Boart Longyear, coms platform Whispir, horticultural outfit Costa, dental group Pacific Smiles and health provider Healthia have all been delisted.
In each case, their ASX departure followed an agreed private equity buyout - mostly by institutional investors, especially superannuation funds and foreign institutions.
There haven't been many major new listings in that time either, the most notable being chemicals business Redox, Mexican-themed restaurant chain Guzman y Gomez and copper miner Metals Acquisition.
The Australian Securities and Investments Commission has made it a priority this year to engage market participants about the growing role of private markets and has a dedicated team doing so, says ASIC chairman Joe Longo.
"As we see more and more activity in the private market, the question I've got for myself and for ASIC as well is, 'What's going on here?' he told a Bloomberg event this week.
"It's less transparent. Should we be worried about conflicts of interest and valuations? Why does capital seem to be flowing more to the private markets and not to the public?"
ASIC has been asking if it part of the problem and whether Australia's regulatory settings are deterring investment in the public markets, Mr Longo says.
He's concerned that the compliance cost of being a listed company is driving people into private markets.
"The stakes are very high. If Australia's going to maintain its reputation for being a confident place to invest ... then if there are changes we need to make, we need to make them," he told his audience.
Yet the rise of private equity and the declining number of public listings is also a global phenomenon, not just something locally specific.
Barrenjoey Capital co-chairman Guy Fowler says senior managers and directors who have worked in both worlds privately believe all they need to focus on is running the business.
"In a public setting, understandably, there's a whole lot more you need to worry about - proxy advisors and (remuneration) reports et cetera, et cetera," he says.
"And it takes a lot of time.
"It used to be a world where if you wanted access to capital, you need to be public," he says.
"That world's changing and there are deep pools of capital which are available in private markets, and we just need to make sure we aren't overly hamstringing or disadvantaging people wanting to be in the public domain."
The Reserve Bank also examined the growth of Australia's private equity market in its April Bulletin publication, with authors Jacob Harris and Emma Chow writing of both the benefits and costs of a larger private equity market.
While private markets are less transparent, they can be an important source of funding for new, innovative businesses and a source of expertise and experience for underperforming larger companies, they found.
Treasury Wine Estates and Brambles chair John Mullen, in his final address as Telstra chairman last year, said public equity and other private structures were attracting more talented executives and directors who don't want the "public scrutiny and hassle".
Private companies spend more time on strategy and performance, and less time on bureaucratic governance and remuneration processes, he said. They're also more willing to take risks and look to the long term.
"There is a lot we can learn from private equity and private capital in how to make companies leaner, faster and more efficient, and I hope the pendulum starts to swing back a bit the other way, as we still need a healthy and dynamic public company regime in Australia," he told shareholders.
ASX managing director and chief executive Helen Lofthouse also told this week's Bloomberg forum private and public markets are complementary, and she welcomed Mr Longo's focus on making sure there is a level playing field between listed and unlisted companies.
Lawmakers in Canberra did that recently when they amended pending climate disclosure legislation so it will apply to both public and private companies, she said.
Ms Lofthouse added, however, that it's important to put the growth of private equity in Australia into perspective.
At last count there was about $66 billion in Australia private equity and venture capital funds, she said. That's about 2.5 per cent of the capital in the public listed market.
"The scale is still quite small relative to the scale of the public listed market," she said.
