ZIMSEC O Level Business Studies Notes: Going public and Going Private
- 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
- 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.