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A public company, publicly traded company, publicly held company, or public

limited company (in the United Kingdom) is a limited liability company that offers
its securities (stock/shares, bonds/loans, etc.) for sale to the general public, typically
through astock exchange, or through market makers operating in over the
counter markets. ublic companies, including public limited companies, must be listed on
a stock exchange depending on their si!e and local legislation.
ublic companies are not to be confused "ith #overnment$o"ned corporations also
kno"n as publicly o"ned companies "hich are also sometimes called public
companies.
Contents
%hide&
' (ecurities of a public company
'.' Advantages
'.) *isadvantages
'.+ (tockholders
) #eneral trend
+ rivati!ation
, -rading and valuation
. (ee also
/ 0eferences
Securities of a public company[edit]
Usually, the securities of a publicly traded company are o"ned by many investors "hile
the shares of a privately held company are o"ned by relatively fe" shareholders. A
company "ith many shareholders is not necessarily a publicly traded company. 1n the
United (tates, in some instances, companies "ith over .22 shareholders may be re3uired
to report under the (ecurities 4xchange Act of '5+,6 companies that report under the
'5+, Act are generally deemed public companies. -he first company to issue shares is
generally held to be the *utch 4ast 1ndia 7ompany in '/2'%citation needed&, but 3uasi$
corporate entities, often trading or shipping concerns, are kno"n to have existed as far
back as 0oman times.
Advantages[edit]
ublicly traded companies are able to raise funds and capital through the sale (in the
primary or secondary market) of their securities, "hether debt or e3uity. -his is the
reason publicly traded corporations are important8 prior to their existence, it "as very
difficult to obtain large amounts of capital for private enterprises. -he profit on stock or
bonds is gained in form of dividend or capital gain to the holders of such securities.
-he financial media and analysts "ill be able to access additional information about the
business.%clarification needed&
Disadvantages[edit]
rivately held companies have several advantages over publicly traded companies. A
privately held company has no re3uirement to publicly disclose much, if any, financial
information6 such information could be useful to competitors. 9or example, publicly
traded companies in the United (tates are re3uired by the (47 to submit an annual 9orm
'2$K containing a comprehensive detail of a company:s performance. rivately held
companies do not file 9orms '2$K6 they leak less information to competitors, and they
tend to be under less pressure to meet 3uarterly pro;ections for sales and profits.
ublicly traded companies are also re3uired to spend more for certified public
accountants and other bureaucratic paper"ork re3uired of all publicly traded companies
under government regulations. 9or example, the (arbanes<xley Act in the United
(tates does not apply to privately held companies. -he money and income of the o"ners
remains relatively unkno"n by the public.
Stockholders[edit]
1n the United (tates, the (ecurities and 4xchange 7ommission re3uires that firms "hose
stock is traded publicly report their ma;or shareholders each year.%'& -he reports identify
all institutional shareholders (primarily, firms o"ning stock in other companies), all
company officials "ho o"n shares in their firm, and any individual or institution o"ning
more than .= of the firm:s stock.%'&
General trend[edit]
9or many years, ne"ly created companies "ere privately held but held initial public
offering to become publicly traded company or to be ac3uired by another company if
they became larger and more profitable or had promising prospects. >ore infre3uently,
some companiessuch as investment banking firm #oldman (achs and logistics services
provider United arcel (ervice (U() $$ chose to remain privately held for a long period
of time after maturity into a profitable company.
?o"ever from '55@ to )2'), the number of corporations publicly traded on American
stock exchanges dropped ,,=.%)& According to one observer (#erald 9. *avis), Apublic
corporations have become less concentrated, less integrated, less interconnected at the
top, shorter lived, less remunerative for average investors, and less prevalent since the
turn of the )'st centuryA.%+& *avis argues that technological changes such as the decline
in price and increasing po"er, 3uality and flexibility of computer Bumerical
control machines and ne"er digitally enabled tools such as +* printing "ill lead to
smaller and more local organi!ation of production.%+&
rivati!ation[edit]
A group of private investors or another company that is privately held can buy out the
shareholders of a public company, taking the company private. -his is typically done
through a leveraged buyout and occurs "hen the buyers believe the securities have been
undervalued by investors. 1n some cases, public companies that are in severe financial
distress may also approach a private company, or companies to take over o"nership and
management of the company. <ne possibility "ould be to participate in a fresh round of
share$rights issue calculated to provide the share$buyer "ith a super ma;ority. Cith a
super ma;ority, the company could then be de$listed i.e. privati!ed.
1n addition, one publicly traded company may be purchased by one or more publicly
traded company(ies), "ith the bought$out company either becoming a subsidiary or ;oint
venture of the purchaser(s) or ceasing to exist as a separate entity, its former shareholders
receiving either cash, shares in the purchasing company or a combination of both. Chen
the compensation in 3uestion is primarily shares then the deal is often considered
a merger. (ubsidiaries and ;oint ventures can also be created de novo $ this often happens
in the financial sector. (ubsidiaries and ;oint ventures of publicly traded companies are
not generally considered to be privately held companies (even though they themselves are
not publicly traded) and are generally sub;ect to the same reporting re3uirements as
publicly traded companies. 9inally, shares in subsidiaries and ;oint ventures can be (re)$
offered to the public at any time $ firms that are sold in this manner are called spin$outs.
>ost industriali!ed ;urisdictions have enacted la"s and regulations that detail the steps
that prospective o"ners (public or private) must undertake if they "ish to take over a
publicly traded corporation. -his often entails the "ould$be buyer(s) making a formal
offer for each share of the company to shareholders. Bormally some form
of superma;ority is re3uired for this sort of the offer to be approved, but once it happens
then usually all shareholders are compelled to sell at the agreed$upon price and the
company either becomes a subsidiary, ceases to exist or becomes privately held.
"rading and valuation[edit]
-he shares of a publicly traded company are often traded on a stock exchange. -he value
or Asi!eA of a company is called its market capitali!ation, a term "hich is often shortened
to Amarket capA. -his is calculated as the number of shares outstanding (as opposed to
authori!ed but not necessarily issued) times the price per share. 9or example, a company
"ith t"o million shares outstanding and a price per share of U(D,2 has a market
capitali!ation of U(DE2 million. ?o"ever, a company:s market capitali!ation should not
be confused "ith the fair market value of the company as a "hole since the price per
share are influenced by other factors such as the volume of shares traded. Fo" trading
volume can cause artificially lo" prices for securities, due to investors being
apprehensive of investing in a company they perceive as possibly lacking li3uidity.
9or example, if all shareholders "ere to simultaneously try to sell their shares in the open
market, this "ould immediately create do"n"ard pressure on the price for "hich the
share is traded unless there "ere an e3ual number of buyers "illing to purchase the
security at the price the sellers demand. (o, sellers "ould have to either reduce their price
or choose not to sell. -hus, the number of trades in a given period of time, commonly
referred to as the AvolumeA is important "hen determining ho" "ell a company:s market
capitali!ation reflects true fair market value of the company as a "hole. -he higher the
volume, the more the fair market value of the company is likely to be reflected by its
market capitali!ation.
Another example of the impact of volume on the accuracy of market capitali!ation is
"hen a company has little or no trading activity and the market price is simply the price
at "hich the most recent trade took place, "hich could be days or "eeks ago. -his occurs
"hen there are no buyers "illing to purchase the securities at the price being offered by
the sellers and there are no sellers "illing to sell at the price the buyers are "illing to pay.
Chile this is rare "hen the company is traded on a ma;or stock exchange, it is not
uncommon "hen shares are traded over$the$counter (<-7). (ince individual buyers and
sellers need to incorporate ne"s about the company into their purchasing decisions, a
security "ith an imbalance of buyers or sellers may not feel the full effects of recent
ne"s.

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