Publicly Traded Companies

What is a Publicly Traded Company?

Publicly Traded Companies also known as the publically listed companies refers to all those companies which have their shares listed on any of the stock exchanges which allow the trading of its shares to the common public i.e., anyone can sell or purchase the shares of these companies from the open market.

It is a company that has listed itself on at least one public stock exchange and has issued securities for ownership in the company to public investors. The company makes itself public through a process known as Initial Public OfferingInitial Public OfferingInitial Public Offering (IPO) is when the shares of the private companies are listed for the first time in the stock exchange for public trading and investment. This allows a private company to raise the capital for different purposes.read more, which has to be approved by the Securities and Exchange Regulator of any country.

A certain percentage of the shares are issued to the public, but generally, the controlling stake resides with the majority shareholder. A company going public means the secondary market can determine the value of the entire company through trading between investors.

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Source: Publicly Traded Companies (wallstreetmojo.com)

Examples of Publicly Traded Companies

Shares of such companies are traded in the open market between retail investors and institutional investorsInstitutional InvestorsInstitutional investors are entities that pool money from a variety of investors and individuals to create a large sum that is then handed to investment managers who invest it in a variety of assets, shares, and securities. Banks, NBFCs, mutual funds, pension funds, and hedge funds are all examples.read more. Generally, privately held companies, due to the requirement of large amounts of capital, opt to become public after fulfilling all regulatory requirements. The examples of public traded companies are Procter and Gamble, Google, Apple, Tesla, etc.

Advantages

 Disadvantages

How does a Private Company go Public?

Private organizations go public through a method called Initial Public Offering. They take the help of investment bankers to prepare a prospectus for the same and, if possible, underwrite the issue. The investment bankers also do their due diligence in finding out what would be the best offer priceOffer PriceOffering Price is the price that is decided by an investment banking underwriter when a company plans to go public list shares in the stock exchange for raising capital. This price is based on the future earning potential of the company, however, the price shouldn’t be too high then the shares might not be sold in full and if it is too low then the potential to raise more capital is lost.read more.

Conclusion

A publicly-traded company is a company that has listed itself on at least one public stock exchange and has issued securities for ownership in the organization to public investors. Being a public company has advantages such as access to huge amounts of capital and increased liquidity while there are certain disadvantages, such as a lot of regulatory scrutinies and adhering to reporting requirements.

Such companies stocks are listed on stock exchanges and can be bought or sold in secondary or over the counter markets. Privately held company shares are traded and owned only by a few private investors. Such companies can also opt to become private if the owners buy back all the shares from their shareholders either at a premium or discount based on company performance.

This has been a guide to what is Publicly Traded Company and its definition. Here we discuss the examples of publicly traded companies along with their advantages and disadvantages. You may learn more about our articles below on accounting –

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