A public company is a corporation whose ownership is dispersed among the general public in many share of stock which are freely traded on a stock exchange or in over the counter markets.
Securities of a public company
Generally, the securities of a publicly traded company are owned by many investors while the shares of a privately held company are owned by only a few shareholders. A company with many shareholders is not necessarily a publicly traded company.
Public companies are able to raise capital and funds through the sale of their securities. This makes it very difficult to secure large amounts of capital in a private company. The profit on stock or bonds is gained in the form of a dividend or capital gain to the holders of these securities.
The financial media and analysts will be able to access additional information about the business.
Public companies are required to have their accounts audited by outside auditors and then publish the accounts to their shareholders. Except the cost of the auditing process, it may make useful information available to competitors. There are various other annual and quarterly reports that are required by law.
What is privatisation and how will its effect on a public company?
A group of private investors or another company that is privately help can buy out the shares of a public company and making the company private. This is generally done through a leveraged buyout and it occurs when the buyers believe the securities gave been undervalued by the investors. In some cases, public companies that are in a severe financial bind may also approach a private company or companies to take over the ownership and management of the company.
One public company may be purchased by one or more public companies. The bought out company can either become a subsidiary or a joint venture if the purchaser or just cease to exist as a separate entity. The bought company’s former shareholders receive either money, shares in the purchasing company or both. When the compensation is primarily shares, the deal is considered a merger.
Subsidiaries and joint ventures can also be created “de novo”. Subsidiaries and joint ventures of publicly traded companies are normally not considered to be private help companies and they are generally subjected to the same reporting requirements as public companies. Shares in subsidiaries and joint ventures can be re-offered to the public at any time and firms that are sold in this manner are called spin-outs.