Going public and Going Private

Going Public

• involves converting a private limited company into a public limited company.
• This usually involves an Initial Public Offering.
• A lot of companies go public after trading for a number of years for example Google, Facebook and Twitter.

Reasons for going public

• To maximize shareholder value
• To enable to raise more capital by selling shares on the stock exchange
• To give shareholders a way to liquidate their shares. Often companies are funded by Venture capitalists who may wish to cash out at some future point. When a company goes public the Venture Capitalists can cash in their shares.
• Provides a market valuation for a company and its shares.
• To market and publicize the company

Going Private

• This is when a public limited company is converted into a private limited company. This usually involves buying back all the shares that are owned by the public for example Dell went private in 2013.
• Dell and Heinz went private after being public limited companies for years.

Reasons for going private

• The business can be able to focus on their long term goals away from investor scrutiny
• The business can focus on growth, diversity and other goals without fear of Stock Exchange share turbulence.
• The business can now keep its data private and confidential
• Can avoid the stringent rules and regulations that listed companies have to follow
• To recapture shareholder value
• To regain back control
• To avoid potential hostile take over bids
• To lower operating expenses-running a private limited company is almost always cheaper than running a public limited company
• To avoid the pressure of quarterly and other short term projects

To access more topics go to the O Level Business Notes page.