The End of Public Markets? Open Ai!

[Luke]

Listened to a great podcast today talking about how useless public markets became and how private equity is flourishing.

 

Do we even need retail investors except when the business is shitty and investors hope for a sellout before the public knows it? 

 

The age of private companies before their IPO continuously climbs and sits now at average 14 years. 

 

The funding rounds for OpenAi and other start ups have enough private investors and capital that they dont need the public market anymore - then you also need to put up with quarterly reporting and other standards...

 

We literally have hundred billion dollar companies that stay private and are owned by a private circle of ultra rich and family offices that get access to investments the little man can only dream off...well little man can buy into SPAC Scams or chase highly oversubscribed IPOs or buy ridiculously valued stocks in public markets...

 

Which begs the question: Will companies delay going public even further in the future if there is enough cash and private investors are willing to come up with enough money? 

 

Will public markets become an off-loading place with mostly low returns at IPO prices? 

Edited October 9, 2025 by Luke

[TwoCitiesCapital]

Perhaps this explains some of the continuous elevated valuations? 

 

More retail money chasing fewer names with fewer shares each year as fewer IPOs occur? 

[Parsad]

1 hour ago, Luke said:

Listened to a great podcast today talking about how useless public markets became and how private equity is flourishing.

 

Do we even need retail investors except when the business is shitty and investors hope for a sellout before the public knows it? 

 

The age of private companies before their IPO continuously climbs and sits now at average 14 years. 

 

The funding rounds for OpenAi and other start ups have enough private investors and capital that they dont need the public market anymore - then you also need to put up with quarterly reporting and other standards...

 

We literally have hundred billion dollar companies that stay private and are owned by a private circle of ultra rich and family offices that get access to investments the little man can only dream off...well little man can buy into SPAC Scams or chase highly oversubscribed IPOs or buy ridiculously valued stocks in public markets...

 

Which begs the question: Will companies delay going public even further in the future if there is enough cash and private investors are willing to come up with enough money? 

 

Will public markets become an off-loading place with mostly low returns at IPO prices? 

 

Yeah, stop listening to podcasts and their predictions!

 

There is more money today in public high grade debt in AI than any other category.  Small/medium companies may continue with private funding for longer periods, but public markets will always be tapped for two reasons...investors need to allocate capital to ideas...large industrial changes will always need large amounts of capital.  And only public markets can service that with speed, liquidity and quantity.  Cheers!

 

https://financialpost.com/investing/more-high-grade-debt-tied-to-ai-than-banks

[Luke]

6 hours ago, Parsad said:

 

Yeah, stop listening to podcasts and their predictions!

 

There is more money today in public high grade debt in AI than any other category.  Small/medium companies may continue with private funding for longer periods, but public markets will always be tapped for two reasons...investors need to allocate capital to ideas...large industrial changes will always need large amounts of capital.  And only public markets can service that with speed, liquidity and quantity.  Cheers!

 

https://financialpost.com/investing/more-high-grade-debt-tied-to-ai-than-banks

So why is OpenAi not going public whilst already achieving a valuation of hundreds of billion of dollars? 

 

 

[Castanza]

2 hours ago, Luke said:

So why is OpenAi not going public whilst already achieving a valuation of hundreds of billion of dollars? 

 

 

 

Control

[Eldad]

PE on the whole has half the profit margins and twice the debt and is in the process of blowing up. 
 

Open AI probably doesn’t want to disclose the Weimar Republic levels of cash they are burning daily with no profit source in sight. 

[winjitsu]

9 hours ago, Luke said:

The age of private companies before their IPO continuously climbs and sits now at average 14 years. 

 

Mean while PE funds have distributions and exits at all time lows. LPs aren't getting any real distribution funds and are forced to sell at a discount on the secondary market. Funds can't exit so they pass the bag from one continuation fund to another. Their private investments are deeply underwater and they don't want to take a marked loss. 

 

So not as bleak as you think
 

[DooDiligence]

9 hours ago, TwoCitiesCapital said:

Perhaps this explains some of the continuous elevated valuations? 

 

More retail money chasing fewer names with fewer shares each year as fewer IPOs occur? 

 

So a long squeeze? Love it. Should eventually make my case for hodling.

[Parsad]

5 hours ago, Luke said:

So why is OpenAi not going public whilst already achieving a valuation of hundreds of billion of dollars? 

 

 

 

OpenAI is essentially a one-off compared to the thousands of public companies out there.  There is enough demand where they don't have to tap into the public markets yet.  Most companies don't see that type of demand.  They are also keeping the shareholder group small...contained.  As a private company, they have less regulatory, accounting and legal burdens which reduces costs compared to if they were public.  They also have less reporting in terms of disclosing financials or information about proprietary property.  So there are tremendous benefits to staying private as long as they can...but that isn't the case with 95% of companies out there.  Cheers!

[Gregmal]

Why cares about OpenAI? There’s always been TONS of massive, profitable and private businesses out there. Not sure what that has to do with public investing 

[thepupil]

there are 45,000 stocks in the world with a market cap greater than $25 million

there are 6,500 stocks in the US with a market cap greater than $100 million. 

 

doesn't seem dead to me. 

[Marco Van Basten]

The argument that people like Dimon make is that the number of public companies has declined by 50% in the US in the past several decades driven by regulation and costs of being public.  

[WayWardCloud]

I agree with Luke it's a big deal. As we know only a very small subset of 100+ baggers have accounted for the lion share of overall gains in major indexes. The needles in the haystack. If the Amazon, Google, Facebook, Microsoft, Netflix, Visa, Nvidia... of the next 20 years (such maybe OpenAI, SpaceX, Anthropic, I don't know...) either stay private or IPO but really late only after the first 50x or 100x in value growth have been captured by private money then how will everyone's pension funds fare?

[Spekulatius]

7 hours ago, winjitsu said:

Mean while PE funds have distributions and exits at all time lows. LPs aren't getting any real distribution funds and are forced to sell at a discount on the secondary market. Funds can't exit so they pass the bag from one continuation fund to another. Their private investments are deeply underwater and they don't want to take a marked loss. 

 

So not as bleak as you think
 

I think we are close to peak private equity. Private equity used to be better operators than mismanaged public business they were taking out but I am not sure this is the case any more, now they became so large.

 

I guess what is left is sticking the funds to retail and pension funds at very high valuations, as the bagholder of last resort .

 

The reason for companies goin doing the IPO much later is that there is plenty of money available with private funding and many companies want avoid the scrutiny that comes with a public listing.

 

The control issue can be dealt with different classes of stock.

Edited October 9, 2025 by Spekulatius

[dealraker]

10 hours ago, Spekulatius said:

I think we are close to peak private equity. Private equity used to be better operators than mismanaged public business they were taking out but I am not sure this is the case any more, now they became so large.

 

I guess what is left is sticking the funds to retail and pension funds at very high valuations, as the bagholder of last resort .

 

The reason for companies goin doing the IPO much later is that there is plenty of money available with private funding and many companies want avoid the scrutiny that comes with a public listing.

 

The control issue can be dealt with different classes of stock.

My view too.

[winjitsu]

12 hours ago, Spekulatius said:

I guess what is left is sticking the funds to retail and pension funds at very high valuations, as the bagholder of last resort .

And the cycle completes -- more IPOs coming up in the near future  

 

Saw a recent note there are currently 18k PE funds in the US (according to KKR, more than McDonalds). That's a significant amount of private capital and private companies seeking an exit.

Maybe ... the Russell 2000 can finally outperform again when it's not totally picked out of decent companies 

[Luke]

14 hours ago, WayWardCloud said:

I agree with Luke it's a big deal. As we know only a very small subset of 100+ baggers have accounted for the lion share of overall gains in major indexes. The needles in the haystack. If the Amazon, Google, Facebook, Microsoft, Netflix, Visa, Nvidia... of the next 20 years (such maybe OpenAI, SpaceX, Anthropic, I don't know...) either stay private or IPO but really late only after the first 50x or 100x in value growth have been captured by private money then how will everyone's pension funds fare?

My view exactly, there are many other examples like Sam Altman investing in Stripe which also was a huge multibagger for him. Then you have bytedance, epic games...

 

Public markets can buy these companies when the majority of returns have been made and yes, some things can go from 100b to 2T sure but we miss out on opportunities because we do not belong to a small elite circle of investors that have access to deals we will never get. 

 

And if i look at the creme de la creme of companies right now besides the legacy magnificent 7, i see very important players and great companies we dont get access to because public market liquidity is not required anymore apparently while deals are made behind doors. 

[thepupil]

I don't really see access to late stage growth equity as a) all that exclusive and b) all that of an advantage. There are numerous funds which can buy these things. Rounds are highly competitive. 

 

for those worried about "missing out", i guess an imperfect way would be to buy Scottish Mortgage. you could even go long $100 of Scottish and short $50 of QQQ or ARKK to isolate the privates more. 

 

Scottish Mortgage Trust has 25% in SpaceX, Bytedance, Stripe and 48 other privates, uses a reasonable 12% gearing, charges a reasonable 0.3% mgt fee and trades at a reasonable 10% discount to NAV. US investors should probably buy in IRA as its a PFIC. 

https://media.bailliegifford.com/mws/xlrjja4g/20250812115523_scottish-mortgage-quarterly-data-pack.pdf

[Milu]

3 hours ago, Luke said:

My view exactly, there are many other examples like Sam Altman investing in Stripe which also was a huge multibagger for him. Then you have bytedance, epic games...

 

Public markets can buy these companies when the majority of returns have been made and yes, some things can go from 100b to 2T sure but we miss out on opportunities because we do not belong to a small elite circle of investors that have access to deals we will never get. 

 

And if i look at the creme de la creme of companies right now besides the legacy magnificent 7, i see very important players and great companies we dont get access to because public market liquidity is not required anymore apparently while deals are made behind doors. 

You along with all other public investors have had the chance over that last decade or two to buy Netflix, Amazon, Tesla, nvidia, palantir, and many other similar stocks that became hundred baggers. The issue is that these stocks rarely ever traded at valuations multiples that ‘made sense’ to traditional value investors so they never took action. If open ai or anthropic went public now when they are losing billions of cash, or 5 years ago when they didn’t even have a product, people wouldn’t have invested either and would likely have scoffed at the ‘idiots’ paying 1000 times revenue for a start up.

 

It’s like my friend who whenever we go to a bar convinces himself that any attractive girl that looks at him definitely wants him but since he’s married he can’t do anything. 

[Gregmal]

3 minutes ago, Milu said:

You along with all other public investors have had the chance over that last decade or two to buy Netflix, Amazon, Tesla, nvidia, palantir, and many other similar stocks that became hundred baggers. The issue is that these stocks rarely ever traded at valuations multiples that ‘made sense’ to traditional value investors so they never took action. If open ai or anthropic went public now when they are losing billions of cash, or 5 years ago when they didn’t even have a product, people wouldn’t have invested either and would likely have scoffed at the ‘idiots’ paying 1000 times revenue for a start up.

 

It’s like my friend who whenever we go to a bar convinces himself that any attractive girl that looks at him definitely wants him but since he’s married he can’t do anything. 

100%

 

That and I'd also add that theres plenty of platforms in today's day and age where investors can own these private companies. 

[Parsad]

On 10/9/2025 at 1:17 PM, WayWardCloud said:

I agree with Luke it's a big deal. As we know only a very small subset of 100+ baggers have accounted for the lion share of overall gains in major indexes. The needles in the haystack. If the Amazon, Google, Facebook, Microsoft, Netflix, Visa, Nvidia... of the next 20 years (such maybe OpenAI, SpaceX, Anthropic, I don't know...) either stay private or IPO but really late only after the first 50x or 100x in value growth have been captured by private money then how will everyone's pension funds fare?

 

On 10/9/2025 at 2:23 PM, Spekulatius said:

I think we are close to peak private equity. Private equity used to be better operators than mismanaged public business they were taking out but I am not sure this is the case any more, now they became so large.

 

I guess what is left is sticking the funds to retail and pension funds at very high valuations, as the bagholder of last resort .

 

The reason for companies goin doing the IPO much later is that there is plenty of money available with private funding and many companies want avoid the scrutiny that comes with a public listing.

 

The control issue can be dealt with different classes of stock.

 

Every time there is a major crisis, these things tend to adjust themselves and the loose capital/extremes slowly disappear.  In the next correction, P/E will learn a tough lesson...as credit tightens...more companies will go back to public markets to raise capital.  Then the cycle begins again.  We've seen this so many times before...we should be used to it!  Especially with the extremes we see in policy these days and so much government interference in trying to manipulate fiscal and monetary policy.  The cash amount has slowly accumulated again in my accounts as I take some more profits...not yet huge market correction level...but I see it increasing further and inevitably there will be a significant correction down the road.  Cheers!

[Parsad]

8 hours ago, Milu said:

You along with all other public investors have had the chance over that last decade or two to buy Netflix, Amazon, Tesla, nvidia, palantir, and many other similar stocks that became hundred baggers. The issue is that these stocks rarely ever traded at valuations multiples that ‘made sense’ to traditional value investors so they never took action. If open ai or anthropic went public now when they are losing billions of cash, or 5 years ago when they didn’t even have a product, people wouldn’t have invested either and would likely have scoffed at the ‘idiots’ paying 1000 times revenue for a start up.

 

It’s like my friend who whenever we go to a bar convinces himself that any attractive girl that looks at him definitely wants him but since he’s married he can’t do anything. 

 

+1!  LOL!  Cheers!

[Junior R]

OpenAI and other leading AI companies aren’t owned by traditional private equity firms like Apollo (APO), KKR, or Carlyle Group (CG). Those firms typically focus on distressed companies, using leveraged buyouts to acquire them, extract capital by selling assets, and then attempt turnarounds.

OpenAI’s investors, on the other hand, are not traditional PE players. Similarly, the recent First Brands Group collapse wasn’t driven by the usual private equity suspects either - even Apollo had credit default swaps on first capital debt, resulting in a relatively small payout.

OpenAI’s Sora has tremendous potential - the real question is how much revenue it can ultimately generate. Imagine a studio using a private version of Sora to produce an entire TV show or film. A storyteller could feed the model a script or creative direction, and Sora could generate the visuals without the need for costly on-location filming. In a sense, it could function like Google Maps for visual content creation - systematically generating and stitching together realistic imagery.

While I believe the current valuations of both private and public AI companies are inflated, these technologies will likely drive significant cost reductions for traditional businesses over time.

 

I would rather buy FFH, JOE, APO long term over AI stocks and short term NKE, UNH, PFE, NESTLE, HD over AI stocks

Edited October 12, 2025 by Junior R