We're now down to just 78 public companies headquartered in Minnesota, a drop of eight in the last year alone — and down 100 over the past 25 years. Back in 1992 when the Star Tribune started ranking the top 100 Minnesota public companies, a company had to win a competition to be included. Now, every public company in Minnesota, no matter how tiny, is guaranteed to pick up a participation ribbon every year.
Medical-device companies, which once were our state's strength, are leading the decline. When Vascular Solutions, the company I founded, completed its initial public offering in 2000, we became one of 36 public medical-device companies headquartered in Minnesota. In February, after I sold Vascular Solutions to Pennsylvania-based Teleflex, only nine remained, and just three of those are profitable.
This isn't just a Minnesota phenomenon. Nationally, the number of public companies peaked at 7,500 in July 1998. In the last 20 years, that number has dropped by more than half. With the number of IPOs down 65 percent over the last two years to the lowest number since 2009, and with only one IPO completed in Minnesota since 2015, this decline is certain to continue.
What's the cause? The simple answer isn't the correct one. It isn't that the financial markets have dried up. With market valuations at an all-time high and small companies outperforming the broader market, demand for public company stocks vastly outstrips supply.
Instead, it's the costs of being a public company that have continued to increase, making it more attractive to sell to a larger company or stay private. From Sarbanes-Oxley expenses to increasing legal fees and compliance requirements, the minimum annual costs of being a public company now easily exceed $1 million. For a small company, that can be the difference between a profit and a loss.
In addition, the intangible costs of being a public company are increasingly unattractive. Every quarterly financial result, every compensation decision and every bump in the road is magnified by being public.
A hiccup becomes fodder for a rapacious group of attorneys that specialize in shaking down publicly traded companies under the high-minded guise of "shareholders' interests."
Recently, even the federal government has gotten into the act, as I experienced in my own five-year misguided criminal prosecution by the Justice Department. That's the reason I decided to sell Vascular Solutions and exit the public company stage — I didn't want to be faced with managing a second false criminal indictment as a public company CEO.