Public Markets and Private Power
Over recent years, American corporate finance has quietly shifted towards a system that bears little resemblance to the transparent, publicly monitored market most people attribute to large companies in America. Loans and equity stakes are increasingly concentrated in private investment funds rather than being dispersed across banks or public shareholders, resulting in a situation in which tremendous amounts of corporate capital move with little outside visibility. This concentration changes how companies are managed and financed, with fewer checks from the public, less scrutiny from regulators, and weaker feedback from market prices. For many companies, private credit means faster and more efficient financing. At the same time, the very size and influence of these funds mean the risks they create do not just affect one company, but rather cascade through sectors of the broader economy. This trend has raised important questions relating to transparency and governance in the modern corporate landscape.
The growth of private credit shows how finance has become less transparent. In the wake of the 2008 financial crisis, new banking rules were implemented to make banks safer and less likely to collapse. Those rules forced banks to hold more capital, limit risky lending, and regularly undergo stress tests to prove they could withstand an economic shock. Those changes strengthened the banks but simultaneously pushed riskier corporate lending out of the traditional banking system. Private credit funds filled the gap left by that pullback, providing loans that banks could no longer or would not make. Since private credit funds are not banks, there are no strict limits on how much they can invest or the risks they take. Their loans are not registered for public trading and are not required to be released to the public in the form of a report. That makes it difficult for the public to know how much debt a company has or what terms the loan carries, overall reducing transparency. Private funds can operate this way because they are structured in a way to rely on exemptions that do not rely on standardised governance or public oversight. This allows private credit to grow rapidly and operate outside of the public eye. Natural signals of danger in the economy, like interest rates and bond prices, are largely absent in the field of private credit.
This dynamic is reinforced by changes in the ownership of corporate equity. Many firms, especially those that have been taken private by investment funds, are controlled by just a few large investors. Such concentration undermines traditional protections afforded to shareholders. Public companies are obliged to publish regular reports, hold shareholder votes, and, in some circumstances, even allow their management decisions to be challenged by minority shareholders. If the company is owned privately by a few funds, such mechanisms could lose their force. In these circumstances, managers may take actions which serve the interests of the controlling fund at the expense of long-term health or other stakeholders, including employees or smaller investors. Concentration shifts the dynamic of decision-making. Whereas a company board might earlier have been sensitive to the dozens of independent shareholders or analysts scrutinising publicly available information, now a few fund managers can effectively determine decisions with little pressure from outsiders.
These trends combine in ways that have real-world implications for corporate restructuring. In traditional public markets, bondholders and shareholders act as a dispersed group, while the prices of publicly traded bonds send signals to investors and creditors about the financial health of a company. Once debt is held in private by one fund, those signals disappear, and the company's financial condition becomes much less apparent. A class-action lawsuit was filed against the public company Pluralsight in 2019 for making false and misleading statements about the company’s performance, artificially inflating the stock price. Pluralsight’s transition to private ownership allowed it to avoid bankruptcy and reduce debt by nearly $1.3 billion. Without the oversight of public shareholders, the private company focused on long-term growth and business transformation rather than artificial growth. However, because this was private, it was hard for outside parties to determine whether the decisions made by the company in private served the best interests of all stakeholders.
The example of Pluralsight shows how meaningful this opacity can be. When the company was still public, shareholders accused it of making misleading statements that falsely inflated its stock price, resulting in a class-action lawsuit. Because private companies do not have to share detailed financial information, it becomes impossible for outsiders to assess whether this restructuring served employees, customers, and debt holders, or only the private owners. This company highlights the core problem in private ownership: it can protect the company from external pressures, but it also eliminates the transparency that allows stakeholders to assess the fairness of major decisions.
The rapid expansion of private credit and private equity ownership shows how quickly modern corporate finance has shifted beyond the regulatory structures built into the United States. Core federal legislation, such as the Securities Act of 1933 and the Securities Exchange Act of 1934 were built on the idea that transparency is the best protection for investors and the market. Public companies must disclose their finances through forms like the 10-K, 10-Q, and 8-K so that the shareholders and the public can monitor their behaviour. Private credit operates entirely outside of this structure. Funds that lend through private credit often rely on exemptions in these laws that allow companies to raise enormous amounts of money without making their financial information public. These exemptions were originally meant for small, specialised investments, but private credit funds that control trillions of dollars in corporate loans. Laws designed for narrow, private transactions now extend over a large part of corporate financing.
Taken together, these developments show how American corporate finance has drifted from a system that was grounded in transparency into one that is dominated by the private sector. Laws meant for a world of public markets now govern an economy shaped by private institutions. The legal question is no longer whether private credit should exist, but whether the current legislation is sufficient to protect stakeholders and the broader economy in a system where so much could happen behind closed doors. The trend towards private capital threatens to weaken the legal accountability that has historically ensured that large companies operate in a way consistent with the interests of the public.
Bibliography
Dale, Margaret. 2025. “Page Restricted.” Privateequitylitigation.com. https://www.privateequitylitigation.com/2025/05/three-risks-to-monitor-in-private-credit/.
PricewaterhouseCoopers. 2025. “Private Credit: Rewiring Credit in Capital Markets: PwC.” PwC. https://www.pwc.com/us/en/industries/financial-services/library/private-credit.html.
“What Is Private Credit? And Why Investors Are Paying Attention.” 2025. Ssga.com. February 26. https://www.ssga.com/us/en/intermediary/insights/what-is-private-credit-and-why-investors-are-paying-attention.
“Private Credit: An Introduction | Hamilton Lane.” 2025. Hamilton Lane. https://www.hamiltonlane.com/en-us/knowledge-center/intro-to-private-credit.
“The Promise and Perils of Private Credit.” 2025. Duke University School of Law. https://law.duke.edu/news/promise-and-perils-private-credit.
Team, SmartAsset. 2025. “Private Credit vs. Private Equity: Pros and Cons for Investors.” Smartasset.com. SmartAsset. September 24. https://smartasset.com/investing/private-credit-vs-private-equity.
Morgan Stanley. 2023. “Outlook: Private Credit | Morgan Stanley.” Morgan Stanley. Morgan Stanley. https://www.morganstanley.com/ideas/private-credit-outlook-considerations.
“Investment Advisers Act of 1940.” 2025. Govinfo.gov. https://www.govinfo.gov/app/details/COMPS-1878.
“What Is the Securities Act of 1933? | Winston & Strawn Legal Glossary.” n.d. Winston & Strawn - What Is the Securities Act of 1933? | Winston & Strawn Legal Glossary. https://www.winston.com/en/legal-glossary/what-is-securities-act-of-1933.
“Pluralsight, Inc. Securities Litigation.” 2020. Cohen Milstein. March 27. https://www.cohenmilstein.com/case-study/pluralsight-inc-securities-litigation/.
Leonard, Collin. 2025. “Pluralsight Settles Class Action Suit for $20M after Dismissal and Appeal.” Yahoo Finance. February 8. https://finance.yahoo.com/news/pluralsight-settles-class-action-suit-225820649.html.