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 securities that are available on an exchange or an over-the-counter market, and the population who trades those securities.
- Public refers to anything that can be accessed by any person or group in the general population.
- In finance, public refers to securities available on an exchange or an over-the-counter market.
- Publicly-listed companies are companies whose shares are available for trading in public markets.
- As opposed to privately-owned companies, publicly-listed companies have to abide by strict disclosure and regulatory requirements.
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 (IPO). This process, sometimes also called "going public," permits the market to determine the value of a company as the public trades shares of that company.
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. However, 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 IPO 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. Additionally, when a company goes public, it can distributes its risk because shareholders are also forced to take 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 generally do not trade on exchanges. However, governments can divest their stake in a publicly-owned entity by listing it on the stock market. For example, the Indian government divested its ownership stake in several publicly-owned companies by making them available for trading in the Indian stock market. An example is Coal India Limited, a company that is still owned partially by the Indian government but is also the biggest equity by market capitalization on the Bombay Stock Exchange (BSE).
Example of Public
Technology behemoths Meta (formerly Facebook) and Google started off as privately-owned companies. As privately-owned companies, they were accountable only to their investors, which consisted mainly of venture capital funds. Their finances and operations were not subject to regulatory and public accounting scrutiny, and their valuations were based on private assessments of their potentials.
Now, as publicly-listed companies, any price swings in their stock are subject to quarterly earnings reports, technical analysis, and news developments. As their operations have become more transparent, both companies have also been extensively criticized by regulators and experts, especially for their lax practices in regards to protecting the privacy of their users.