Privatization

AAA

DEFINITION of 'Privatization'

1. The transfer of ownership of property or businesses from a government to a privately owned entity.

2. The transition from a publicly traded and owned company to a company which is privately owned and no longer trades publicly on a stock exchange. When a publicly traded company becomes private, investors can no longer purchase a stake in that company.

INVESTOPEDIA EXPLAINS 'Privatization'

1. One of the main arguments for the privatization of publicly owned operations is the estimated increases in efficiency that can result from private ownership. The increased efficiency is thought to come from the greater importance private owners tend to place on profit maximization as compared to government, which tends to be less concerned about profits.

2. Most companies start as private companies funded by a small group of investors. As they grow in size, they will often access the equity market for financing or ownership transfer through the sale of shares. In some cases, the process is subsequently reversed when a group of investors or a private company purchases all of the shares in a public company, making the company private and, therefore, removing it from the stock market.

RELATED TERMS
  1. Denationalization

    The act of changing a government-run firm into a private-sector ...
  2. Nationalization

    Refers to the process of a government taking control of a company ...
  3. Exchange

    A marketplace in which securities, commodities, derivatives and ...
  4. Corporation

    A legal entity that is separate and distinct from its owners. ...
  5. Crown Corporation

    Any corporation that is established and regulated by a country's ...
  6. Going Public

    The process of selling shares that were formerly privately held ...
Related Articles
  1. Why Companies Stay Private
    Investing Basics

    Why Companies Stay Private

  2. State-Run Economies: From Public To ...
    Personal Finance

    State-Run Economies: From Public To ...

  3. Why Public Companies Go Private
    Options & Futures

    Why Public Companies Go Private

  4. What's the difference between publicly- ...
    Investing

    What's the difference between publicly- ...

comments powered by Disqus
Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  3. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  4. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center