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