What is Public
Public refers to anything that can be accessed by any person or group in the general population. In the context of investment and finance, the term is most commonly used to describe the securities available on an exchange or an over-the-counter market, and the population who trades those securities.
BREAKING DOWN Public
Any securities on a public market can be bought and sold by anyone in the general population. In the 17th century, The Dutch East India Company became the first company to be listed on a global stock exchange, laying the groundwork for international commerce in the ensuing centuries.
Today, thousands of companies make shares and financial products available to be bought or sold by the public, and must follow the reporting requirements of the Securities And Exchange Commission, their shareholders, the press and other interested public parties. As a result, public companies tend to be more transparent and subject to much more public scrutiny than private companies.
Public Companies vs. Private Companies
Companies may trade shares on the stock market and become public through an initial public offering. This process, sometimes also called going public, permits the market to determine the value of a company as the public trades shares.
A company that has not yet gone public and is still owned by its founders, employees or other private entities is known as a private company. Typically, businesses begin as private companies and become publicly-traded as they grow and meet the regulatory requirements necessary to become publicly-traded.
Regulatory scrutiny increases significantly for publicly-traded companies, which must regularly report to both government entities and shareholders, but public trading provides many economic advantages to companies, including additional revenue generated through the shares traded on the marketplace.
When a company first goes public, the initial public offering is typically an opportunity for the company to access larger amounts of capital beyond the profits the business draws. A public company also increases liquidity for a company and distributes risk, ensuring that shareholders are able to distribute responsibility for potential debt and loss.
Publicly-traded vs. Publicly-owned
Publicly-traded entities differ from publicly-owned entities in one key way: publicly-owned companies are owned by the government or the people of a nation or state and are also sometimes known as state-owned enterprises. By their nature, such companies do not trade on exchanges.