Nation’s stock market getting smaller, not bigger.

Wall Street, the Home of the Vanishing I.P.O.

Excerpts:

Hundreds of stocks that once captivated investors — Pets.com, anyone? — vanished long ago. Scores of big-name public companies have passed into private hands. Others have been gobbled up by rivals.

As a result the number of companies listed on the nation’s major exchanges has plummeted, to 4,048 today from a peak of 7,459 in 1997.

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Some economists warn the economy will suffer if innovative private companies cannot or will not turn to the public markets.

“We should be very concerned about this trend,” said Andrew W. Lo, the director of the MIT Laboratory for Financial Engineering. “Capital markets are central to business formation and economic growth, and if listings are falling, that is a sign there is not the same level of capital formation as there was in the past.”

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Some critics say the incredible shrinking stock market is one of the unexpected results of regulations like the Sarbanes-Oxley Act of 2002, which have increased companies’ legal bills.

Comments: Companies that stay private limit exposure to all the legal requirements of Sarbanes-Oxley.