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Market observers like to keep an eye on initial public offerings because the pace and size of IPOs is a good gauge of the mood of the market. Willingness to put your money in a brand-new company is a good measure of your tolerance for risk at any given time.
But over the long term, the flow of IPOs can tell us something else: Something about the vitality of a particular country’s economy and the growth of their stock markets.
In this regard, the U.S. seems to be falling behind.
According to new figures from Russell Investments, which handles the Russell Global Index: In 1997, U.S. IPOs were 44% of the global total. That fell to 27% in 2007, and “may drop to a ten-year low this year.”
It’s not just a relative decline — i.e. as compared to fast-growing emerging economies. In 1997, the U.S. produced 226 IPOs, and only 151 in 2007.
Brazil, China, India and Russia produced 20 IPOs in 1997 and 118 in 2007, an almost six-fold increase.