What Is a Publicly Traded Company?

A publicly traded company sells shares to the public after going through an 澳洲幸运5官方开奖结果体彩网:initial public offering (IPO). Shares are sold on stock exchanges or over-the-counter (OTC), giving shareholders a stake in the company's profits and assets. According to the 澳洲幸运5官方开奖结果体彩网:Securities and Exchange Commission (S꧑EC), public companies have public reporting requirements. As such, they must regularly disclose their financial information and securities trading on public exchanges.

Understanding a Publicly Traded Company

Most public companies begin as private companies that were owned by founders, management, or private investors. Private companies don't have any public reporting requirements. A company is required to conform to public reporting requirements when it meets any of certain criteria:

• They sell securities in an IPO.
• Their investor base reaches a certain size.
• They voluntarily register with the SEC.

An IPO is the process by which a private company begins offering shares to the public in a new stock issuance. A company is considered private before completing an IPO. Issuing shares to the public through an IPO is very important for a company because it provides it with a source of capital to fund growth.

There are requirements to complete an IPO. Regulations are set forth by stock exchange regulators where it hopes to trade and by the SEC. A compa♏ny usually hires an investment bank to market its IPO, determine the price of its shares, and set the date of its stock issuance. Private investors are offered share premiums when the company undergoes an IPO to reward them for their investment.

U.S. companies with at least $10 million in assets and either 2,000 shareholders or those with 500 or more unaccredited investors must register with the SEC as a public company and adhere to its reporting standards and regulations.

Special Considerations

A public company may choose to revert to a private company for many reasons. It may decide that it's too cumbersome to adhere to and comply with the costly regulatory requirements or it might want to free up its resources to devote to 澳洲幸运5官方开奖结果体彩网:research and development (R&D), capital expenditures, and funding pensiꦫon plans fo🤡r its employees.

A take-private transaction is necessary when a company transitions to private. A private equity firm or a 澳洲幸运5官方开奖结果体彩网:consortium of firms either purchases or acquires thꦕe outstanding stock. This may require the private equity firm to secure additional financing from an investment bank or another type of len⛄der that can provide enough loans to help finance the deal.

Once this is complete, the company is delisted and returns to private operations when the purchase of all the outstanding shares is complete.

Advantages and Disadvantages of 🏅Publ෴icly Traded Companies

Advantages

Public companies can access financial markets and can raise money for expansion and other projects. This can be done by selling stocks or 澳洲幸运5官方开奖结果体彩网:corporate bonds. 🌟An investor who ▨purchases a corporate bond is effectively lending money to the corporation in return for a series of interest payments. These bonds may also actively trade on the secondary market in some cases.

Going public also allows companies to boost their corporate profile, products and services, and business strategy. Increasing public awareness can also help the company gain 澳洲幸运5官方开奖结果体彩网:market share.

Disadvantages

The ability to access the public capital markets also comes with increased regulatory scrutiny, administrative and financial reporting obligations, and corporate governance bylaws. This results in less control for the majority owners and f♕ounders of the corporation. There are also substantial costs to conducting an IPO, as well as the ongoing legal, accounting, and marketing costs of maintaining a public company.

Public companies must meet mandatory reporting standards. Companies must disclose financial statements along with other public filings. This includes 澳洲幸运5官方开奖结果体彩网:Form 10-K, which gives a comprehensive summary of a company's financial performance. Other forms include quarterly financial 10-Q reports and 8-K when certain events occur. These events include the election of new directors or the completion of an acquisition.

A public company must answer to its shareholders. Shareholders elect a board of directors that oversees the company's operations on their behalf. Certain activities such as 澳洲幸运5官方开奖结果体彩网:mergers and acquisitions (M&A) and some corporate structure changes and amendments must be bro🌊ught up for shareholder approval. This effectively means that shareholders 🥃can control many of the company's decisions.

The Bottom Line

You probably own stock in a public company if you've invested in a mutual fund or a pension plan because many plans and funds make use of this type of investment. You can invest directly in such a company as well if you choose to do so. In either case, you and the other shareholders have an ownership stake in the company proportional to the amount of stock you've purchased.