Even The IPOs Are Old Now

As startups delay going public and mature companies diversify, is the market mellowing?

- Pat Regnier​​​​​​​

Certain adjectives come to mind in describing the U.S. stock market. Sprawling. Resilient. Diverse. Here’s another you probably haven’t thought of: old. Thanks to an absence of new entrants, the average age of companies listed on U.S. exchanges has been steadily rising for three decades. Now it’s 20 years, almost twice the average in 1997 during the dot-com craze.

The market won’t be getting much younger this year. Six unicorn tech giants, including ride-sharing network Uber Technologies Inc. and online homerental service Airbnb Inc., are preparing to go public at an average age that’s four years older than what was typical two decades ago.

What happens when a population ages? Opinions abound in the stock market. Some say investors miss out. Fund managers find it harder to build portfolios that truly reflect what’s happening in the economy as new companies stay private. Another theory compares stocks to people and says both slow down and eschew risk. And while that notion seemed crazy amid December’s equity earthquake, a case can be made that a mature market is less volatile.

Aging implies durability. “That’s the key here: Older firms, larger firms, have a better track record because you became large,” says René Stulz, the Everett D. Reese Chair of Banking and Monetary Economics at Ohio State University. “You have more of a cushion against the impact of bad news. You might be diversified, you might be operating across different countries, different parts of the country. All of that merely tends toward having less volatility.”