What is 'Public Company'
A public company is a company that has issued securities through an initial public offering (IPO) and is traded on at least one stock exchange or in over-the-counter markets. Although a small percentage of shares may be initially floated to the public, becoming a public company allows the market to determine the value of the entire company through daily trading.
BREAKING DOWN 'Public Company'
Public companies are publicly traded within the open market with shares being purchased by a variety of investors. Most public companies originated from private companies that, after meeting all regulatory requirements, opted to become public in an effort to raise large amounts of capital. Examples of public companies include Google Inc., F5 Networks Inc., Chevron Corporation, and Procter & Gamble Co.
Advantages and Disadvantages of Public Companies
Public companies have certain inherent advantages over private companies, including the ability to sell future equity stakes and increase access to debt markets. Once a company goes public, additional revenue can be generated through additional offerings, which involve the creation and sale of new shares within the marketplace.
However, with these advantages comes increased regulatory scrutiny and less control for majority owners and company founders. Public companies must meet mandatory reporting standards as regulated through government entities. Additionally, applicable shareholders are entitled to documents and notifications regarding the activities transpiring within the business upon which they hold an interest.
Public Company Operations and Shareholder Interests
Once a company is public, it must answer to its shareholders. For example, certain corporate structure changes and amendments must be presented for shareholder votes. Shareholders can vote with their dollars by bidding up the company to a premium valuation or selling it to a level below its intrinsic value.
Public Company Reporting and Disclosure Requirements
Stringent reporting requirements are set by the U.S. Securities and Exchange Commission (SEC), including the public disclosure of financial statements and annual 10-K reports discussing the state of the company. This ensures that public companies adhere to all rules established by the Sarbanes-Oxley Act and as enforced by the SEC. Each stock exchange also has specific financial and reporting guidelines that govern whether a stock is allowed to be listed for trading.
From Public to Private
In situations where a public company no longer wishes to operate within that business model, it can return to a privately-held state by buying back all outstanding shares from current shareholders. Once the purchase is complete, the company will be delisted from its associated stock exchanges and return to private operations.
-
General Public Distribution
A general public distribution is a primary market offering in ... -
Initial Public Offering - IPO
The first sale of stock by a private company to the public. IPOs ... -
Offering
An offering is the issue or sale of a security by a company. ... -
Repackaging
When a private equity firm takes a public firm private by purchasing ... -
Back Door Listing
A back door listing is a strategy of going public used by a company ... -
Corporatization
The act of reorganizing the structure of government owned entity ...
-
InsuranceThe Ups And Downs Of Initial Public Offerings
Initial public offerings aren't the best option for every company. Consider these factors before "going public." -
InvestingWhy Do Companies Care About Their Stock Prices?
Find out how a company's stock price reflects its value to internal and external shareholders. -
InvestingIPOs Are Becoming Less Attractive for Companies
U.S. companies are choosing to be acquired instead of going public -
InvestingWhy Public Companies Go Private
Privatization can give management more time to make money for investors, but at what cost? -
InvestingValuing Private Companies
You may be familiar with publicly-traded companies, but how much do you know about privately-held firms? -
InsuranceInitial Public Offering (IPO) Explained
An initial public offering (IPO) marks the start of a company's publicly traded life. Find out why companies undergo IPOs, and how the process works. -
Small BusinessPublic Relations: Offering Businesses A Competitive Advantage
To maximize the sales potential of any business, a public relations program should be part of the master marketing plan. -
InvestingReverse mergers: The pros and cons of Acquisition Company
Reverse mergers can provide excellent opportunities for companies and investors, but there are still some downsides and risks. Find out the pros, the cons, and the benefits for an acquisition ... -
Insurance4 Signs A Private Company Is Going Public
There are several signs that can indicate that a company is about to make the big leap. Find out what they are. -
Managing WealthHow to invest in private companies
It can be tough to analyze a company that doesn't trade publicly, but there are several advantages.
-
What are some of the key reasons a large corporation might prefer to remain a private ...
Understand the reasons why a large corporation would want to remain as private instead of going public through an initial ... Read Answer >> -
What are the advantages and disadvantages for a company going public?
Companies often use an initial public offering (IPO) as a way to generate capital. There are both advantages and disadvantages ... Read Answer >> -
What's the difference between publicly- and privately-held companies?
Privately-held companies are owned by the company's founders, management, or private investors. Public companies are owned ... Read Answer >> -
How does privatization affect a company's shareholders?
The most recognized transition between the private and public markets is an initial public offering (IPO). Through an IPO, ... Read Answer >> -
What is the difference between an IPO and a seasoned issue?
Learn how companies issue IPO securities when they first go public and seasoned issue shares if they sell more shares in ... Read Answer >>