Reviewed by Aug 26, 2020| Updated on
A public company is a corporation wherein the ownership is dispensed to general public shareholders through the free trade of shares of stock over-the-counter at markets or on exchanges. Even though a minute percentage of shares are initially given to the public, the daily trading which happens in the market will determine the worth of an entire company. It is termed as ""public"" as the shareholders, who become equity owners of the firm, may be composed of any individual who buys stock in the firm.
Public companies are traded publicly within an open market. Various investors buy shares. Mostly, public companies were initially private companies who became public companies to raise capital post complying with all of the regulatory requirements.
Understanding Public Company
Public companies stand a few advantages when compared to private companies. A public company increases access to a debt market and sells future equity stakes. After a firm goes public, revenue will be generated via additional offerings via creation as well as the sale of new shares within the marketplace.
Public companies come with certain disadvantages too. In a public company, company founders and company founders will have less control. They also come with increased regulatory scrutiny. Also, a public company needs to adhere to mandatory reporting standards which are regulated by government organisations. Furthermore, eligible shareholders will be entitled to notifications and documents on business-related activities.
Once a company becomes public, it will be held accountable to its respective shareholders. As in, shareholders will vote on specific corporate structure amendments and changes. A shareholder can vote with his or her dollars by placing a bid on the company to a premium selling or valuation at a level which is below its intrinsic value.
*Highlights of a Public Company: *
- Public companies issue shares via an IPO and trades on a minimum of one stock exchange.
- Mostly, private firms go public with an aim to raise capital.
- Many public companies opt to go private for gaining more control over the firm and its decisions.