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Thursday, Mar 28, 2024

SPECIAL REPORT: Mouse Tops Size List

The top names on the Business Journal’s list of Largest Public Companies tend to remain the same from year to year, but farther down the list shows a lot of change, reflecting the national trend of fewer companies whose stock is publicly traded. The No. 1 company on the list ranked by market capitalization comes as no surprise – Walt Disney Co. The Burbank entertainment and media giant has held that spot for the 15 years the list has been compiled. Coming in at No. 2 is also not a surprise – Thousand Oaks drug manufacturer Amgen Inc. In a May conference call, Disney Chief Financial Officer Christine M. McCarthy summed up why the company was doing well. “Our financial results this quarter … demonstrate once again how the strength of our brand and a relentless focus on creative excellence and execution can continue to drive growth across our businesses and create value for our shareholders,” McCarthy said during the call. The others toward the top (see list, below) are also long-term residents there, for the most part – Public Storage, Avery Dennison Corp., Teledyne Technologies Inc., DreamWorks Animation SKG Inc., etc. However, this year marks DreamWorks’ last appearance on the list as the studio will be acquired by Comcast Corp. in a deal valued at $3.8 billion. It will be folded into the Universal Filmed Entertainment Group, in Universal City, a division of NBCUniversal. In fact, there are another five companies joining DreamWorks in leaving the list after being bought by either private equity firms or larger public companies. This follows the five public companies that were acquired last year and dropped off the list. In an of itself, the loss of individual public companies is of little concern, so long as they are being replaced in equal or greater numbers by new public companies. But that hasn’t happened. Chris Mone, regional president in Los Angeles for BNY Mellon Wealth Management, said the dwindling number of publicly traded companies is a long trend in the San Fernando Valley and the entire nation. A paper written for the National Bureau of Economic Research in 2015 reported that the number of U.S. public companies traded on major exchanges peaked in 1996 with just more than 8,000. That number had shrunk to 4,100 by 2012. The number has fallen further to less than 4,000 companies, according to various sources. (An additional 15,000 or so are on the over-the-counter markets.) “It has affected virtually all U.S. industries,” Mone said. “There is not a sector or industry that is safe.” Why the drop? Valley companies that have been acquired in the last year come from the IT, real estate, entertainment, biotech, health care and media sectors. In addition to the DreamWorks Animation deal, in the first half of the year Internet service provider United Online Inc. announced it will be bought by B. Riley Financial Inc. in Los Angeles; testing and computer equipment supplier Electro Rent Inc. will be purchased by private investment firm Platinum Equity in Beverly Hills; forage crop developer Ceres Inc. was acquired by Land O’ Lakes Inc.; and online marketer ReachLocal Inc. is being bought by Gannett Co. Inc. (See the story on page 5.) Additionally, Crown Media Holdings Inc. was taken private following a buyout by Hallmark Cards Inc. Acquisition prices for those deals ranged from $17 million for Ceres to the high of $3.8 billion for DreamWorks. Both Mone and Moira Conlon, president of Financial Profiles Inc., a Los Angeles investor relations firm, said there were several reasons for the decrease in the number of public companies – such as the heavier burden of costs and time because of increased regulation for public stock companies, an excess level of cash among strategic buyers, the rise of activist investors and an increase in alternate sources of capital from private equity firms and the like. In the past, small and mid-sized companies that were growing routinely went public to raise what was then cheap money. But it’s no longer so cheap; it’s harder for small and mid-sized companies to go public, since the costs of time and money weigh heavier on them. “Unless you can build to critical mass and the operating performance required to have broad institutional support on Wall Street, you would have to ask, ‘Is it worth it?’” Conlon said. BNY Mellon Wealth Management’s M&A practice works exclusively with middle market companies with revenue in the range of $25 million to $250 million. These companies are no longer looking to the public market when it comes to raising money, Mone said. “They are looking at private equity firms or venture capital firms because with that alternative you can raise capital at a high valuation,” he added.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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