The price of ownership isn’t just about the company. It’s about what you know

Equity investments are simple in theory: you own a share of a company, and if that company grows, so does the value of your share. 

But what makes a company grow? And what makes some companies more valuable than others? 

Equity 101: Ownership-based expectations 

When you buy a share, you buy ownership in a company. Meanwhile, the price you pay for this co-ownership does not depend on the company’s current value. Instead, it relies on what it might be worth later down the line. Sounds counterintuitive?  

It’s essential to remember that when you’re investing, you are not investing in the company’s past. Instead, you are investing in its future. Or rather, the potential that this future holds.  

Investors care about where the company is going, not just where it’s been. If the company is expected to grow, enter new markets, launch improved products, or increase its profits in the future, its shares become more valuable now. Why? Because buyers today want a piece of that future upside. 

This is why two companies with similar revenues today might have very different stock prices: the market expects one to grow faster or more sustainably than the other. 

It all comes down to expectations. And expectations are shaped by information—everything from earnings forecasts to industry trends, interest rates, or global events. 

Public market dynamics: Transparency ≠ Equality  

Because information plays such a crucial role in equity pricing, public markets enforce strict reporting requirements. Listed companies are legally required to disclose financials, risks, and other material facts on a regular basis. This transparency is designed to ensure that all investors—regardless of size and expertise—can access the same information and make decisions on an equal footing. 

Meanwhile, disclosure doesn’t guarantee equal outcomes. Despite best efforts at market transparency, individual investors often lag behind their professional peers.  

Public market mentality: Follow the leader 

In public markets, information flows where attention flows. And money follows. 

In an attempt to keep up with their institutional counterparts, many end up mimicking the moves of large institutions, assuming they have better information or sharper insight. 

This “follow the leaders” dynamic can become self-fulfilling: the more capital flows toward certain companies, the more coverage they receive, the more data becomes available, and the traction they get. 

This dynamic often leads to market concentration in financial markets. A handful of dominant companies—the so-called “Magnificent 7”—now make up 38% of the S&P 500((1. Their visibility attracts investment, which in turn increases their price, attracting even more investment.  

This is not the first time this has happened. In the lead up to the dot-com bubble, the four horsemen – Cisco, Dell, Intel, and Microsoft – dominated the market index. And in the late 60s and 70s it was… The Nifty Fifty. 

Private equity: when information isn’t shared—it’s leveraged 

In private markets, information plays an equally crucial role, but for different reasons.  

In public markets, information is a determinant, setting the price based on market consensus. In private markets, information is an asset that creates value when acted on strategically. 

Before investing in a company, private equity firms gain access to detailed financial information, operational data, and strategic conversations that are not publicly available. This information asymmetry allows them to identify undervalued businesses before others even know they exist.

Public equity rewards fast reaction to public data. 
Private equity rewards deep analysis of private data. 

One of the clearest signs of the different logic underpinning public and private markets? The prices investors are willing to pay. 

According to McKinsey Global Private Market Report 2025, private equity firms have consistently paid lower valuation multiples than public market investors over the past 15 years ((4. In 2024, that gap widened once again. The average global buyout multiple sat at 11.9x EBITDA, while the MSCI World Index climbed to 13.1x. That’s a full 1.2x spread—a meaningful divergence in pricing.  

This pricing divergence reflects how each market processes information, attention, and risk. 

• Public market overvaluation: driven by hype cycles, media attention, and momentum-driven capital (especially into “it” sectors or fleeting fads). 

• Private market discipline: where firms face less competition per deal, conduct deep due diligence, and use proprietary insights to negotiate better entry prices. 

In private markets, information reduces prices. In public markets, it inflates them. 

From price takers to value makers: The private equity advantage 

And once invested, private equity firms don’t just wait for prices to rise—they actively work to create value through operational improvements, governance, strategic shifts, or acquisitions.  

Throughout this process, they leverage their network, access to proprietary market insights, and expertise accumulated through years, if not decades, of experience.  

They don’t just sit on data—they operationalise it. With access to granular operational data, private equity firms identify exactly where and how a business can scale—whether it’s entering new markets, improving margins, reworking supply chains, or enhancing product offerings. Where public investors respond to market moves, private equity architects the next move.