Most corporations of a certain size can't wait to sell their shares on a stock exchange, given the influx of cash and recognition that accompanies an initial public offering. But some things are just too good to share. Other corporations prefer to grow internally, eschewing the public trading of their shares altogether. The advantages to staying private are stark - no reporting requirements, no disassociated shareholders to please, no undue focus on short-term goals. When run sharply, private companies can grow to sizes rivaling those of their largest publicly traded counterparts.

First, a Definition
Determining the world's most valuable private companies largely depends on how you define "private." By some rationale, any company that doesn't trade publicly would count. But atop that list would be Saudi Aramco, which was founded in the 1930s as a subsidiary of America's publicly traded Standard Oil (forerunner of Chevron.) Once Saudi Aramco became profitable in 1950, the Saudi king graciously let Standard Oil keep half the profits while expropriating the rest. The alternative was to have the government simply commandeer the entire company, which it did anyway in 1980.

So best to call Saudi Amarco a state-owned enterprise (along with other giants such as China Mobile and Petrochina), and restrict ourselves to companies that grew out of private-sector ingenuity and continue to flourish as such today.

Turning Wheat into Bread
While the title of America's largest public company has changed over the last couple of decades, from General Motors to Microsoft to ExxonMobil, the most valuable private American company has enjoyed its status largely unchallenged. Cargill is a $27 billion company that you probably have only scant familiarity with, yet have almost certainly patronized. The Minnesota multinational is responsible for a staggering one-quarter of all the grain exports from the United States.

Only a dozen or so American public companies earn more revenue than Cargill and few have its international scope. Cargill operates in 65 nations, on every populated continent, employing 142,000 people. It imports almost one-quarter of all the beef that enters the United States. When you add up all Cargill's interests, everything from phosphate production to energy trading, it totals over $100 billion revenue, annually.

So who does own Cargill? The Cargill family, of course. The understandably secretive Cargills own 90% of the conglomerate, and no, they haven't disclosed any plans to sell anytime soon.

Have a Koch and a Smile
Of slightly smaller size but similar influence is Koch Industries, which is also large enough to rank among the 20 largest public companies in the United States. The company was founded by family patriarch Fred Koch, a chemical engineer who in 1927 developed an efficient way to refine crude oil into gasoline. 85 years later, the company maintains a presence in refining but has expanded into fields as diverse as polymers and ranching. The Wichita-based Koch's most famous subsidiary is Georgia-Pacific, one of the world's largest pulp and paper manufacturers.

Fred Koch died in 1967, willing the company to his four sons. In 1983, brothers Charles and David bought out Fred Jr. and William for what certainly sounded like a generous amount at the time - $1.1 billion. Charles and David each own 42% of the company today, and it's safe to say they'll give thought to selling their interest right around the same time the Cargill clan does.

Out of the Box
Large private companies aren't exclusive to the United States. Europe's most formidable include a Swedish furniture manufacturer (and doubtless the world's biggest popularizer of Allen wrenches), founded in 1943. With net shareholders' equity of $23 billion, IKEA has never strayed from its original business. Today the company operates hundreds of stores in dozens of countries, bringing simple functionality and casual minimalism to the masses.

The multinational's teenage founder, Ingvar Kamprad (the "IK" in IKEA), is now 86 and lives in Switzerland. In 1982 he created a charitable foundation to own the bulk of the company, which it's done ever since. A complete breakdown of IKEA's ownership structure would entail several thousand words, but to summarize, Kamprad's Stichting INGKA Foundation owns the holding company that owns 90% of IKEA's stores. A separate IKEA-branded company owns yet another holding company that owns IKEA's intangibles (trademark, etc.). That company is owned by yet another foundation, founded by Kamprad and based in Liechtenstein, that is saving IKEA millions of dollars in taxes every quarter.

The Bottom Line
As a rule, the successful private companies are the large ones. And the large ones are the ones that consistently reinvest their profits. With no need to worry about paying out dividends, buying back shares on the open market, or other gimmickry that would help make their companies more attractive to potential shareholders, private companies enjoy flexibility and adaptability that most public companies can only dream of.

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: PowerShares FTSE RAFI US 1000

    Find out about the PowerShares FTSE RAFI U.S. 1000 ETF, and explore detailed analysis of the fund that invests in undervalued stocks.
  2. Mutual Funds & ETFs

    ETF Analysis: First Trust Dorsey Wright Focus 5

    Take a closer look at the First Trust Dorsey Wright Focus 5 ETF, a unique and innovative fund of funds based on momentum and relative strength.
  3. Mutual Funds & ETFs

    ETF Analysis: Schwab US Large-Cap

    Discover how the Schwab U.S. Large-Cap exchange-traded fund is managed, the index it tracks and the investors for which it is most appropriate.
  4. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Low Volatility

    Find out about the PowerShares S&P 500 Low Volatility ETF, and learn detailed information about this fund that provides exposure to low-volatility stocks.
  6. Markets

    The 5 Biggest Canadian Insurance Companies

    Learn more about the insurance industry as a whole, how it functions in Canada, and the five largest Canada-based insurance companies.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares Core High Dividend

    Discover how the iShares Core High Dividend ETF is managed, which index it tracks, and for whom it is most suitable as part of an overall portfolio allocation.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares S&P 100

    Discover how the iShares S&P 100 offers an opportunity for investors to gain exposure to mega- and large-cap domestic company stocks.
  9. Stock Analysis

    3 Stocks You Wish You Had Bought in January

    Learn about three stocks investors wish they had bought in January of 2015 due to their performing better than the overall market.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares Russell 1000 Growth

    Learn about the iShares Russell 1000 Growth ETF, including how the fund is constructed, its holdings and its strong recent performance.
RELATED TERMS
  1. Charles Koch

    Charles Koch is the multibillionaire chairman and CEO of Koch ...
  2. David Koch

    David Koch is co-owner of Koch Industries with his older brother ...
  3. S&P 500 Dividend Aristocrats

    Companies that have had an increase in dividends for 25 consecutive ...
  4. Purple Chip Stock

    A term coined by portfolio manager John Schwinghamer to describe ...
  5. Blue-Chip Index

    A stock index that tracks the shares of the top-performing publicly ...
  6. Blue Chip Indicator

    A formal gauge or measure of the performance of a selected group ...
RELATED FAQS
  1. Should I invest in penny stocks or large cap stocks for my retirement portfolio?

    Large-cap stocks are a superior investment option for retirement portfolios compared to penny stocks. Most penny stocks are ... Read Full Answer >>
  2. Is it more beneficial to invest in a blue chip stock or a penny stock?

    Penny and blue-chip are terms used to describe a stock's valuations and statures. Penny stocks are generally the stocks of ... Read Full Answer >>
  3. How can I calculate the forward p/e of the S&P 500?

    Forward price-to-earnings, or P/E, for the S&P 500 is calculated by dividing the market share per price by the forecasted ... Read Full Answer >>
  4. What is Apple's current mission statement and how does it differ from Steve Job's ...

    Apple's current mission statement is "Apple designs Macs, the best personal computers in the world, along with OS X, iLife, ... Read Full Answer >>
  5. Why should I be looking at small cap stocks as a potential investment?

    Investors should look at small-capitalization stocks for upside growth potential and portfolio diversification. Despite these ... Read Full Answer >>
  6. Are mid-cap stocks more profitable than large-cap stocks?

    A mid-cap stock may perform better than a large-cap stock. The stock market can be stable or volatile, and many factors affect ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!