A public company, publicly traded company, publicly held company, publicly listed company, or public limited company is a company whose ownership is organized via shares of stock which are intended to be freely traded on a stock exchange or in over-the-counter markets. A public company can be listed on a stock exchange (listed company), which facilitates the trade of shares, or not (unlisted public company). In some jurisdictions, public companies over a certain size must be listed on an exchange.
Public companies are formed within the legal systems of particular states, and therefore have associations and formal designations which are distinct and separate in the polity in which they reside. In the United States, for example, a public company is usually a type of corporation (though a corporation need not be a public company), in France it is usually a "société anonyme" (SA), in Britain a public limited company (plc), and in Germany an Aktiengesellschaft (AG). While the general idea of a public company may be similar, differences are meaningful, and are at the core of international law disputes with regard to industry and trade.
In the early modern period, the Dutch developed several financial instruments and helped lay the foundations of the modern financial system.The Dutch East India Company (VOC) became the first company in history to issue bonds and shares of stock to the general public. In other words, the VOC was officially the first publicly traded company, because it was the first company ever to be actually listed on an official stock exchange. While the Italian city-states produced the first transferable government bonds, they did not develop the other ingredients necessary to produce a fully fledged capital market: corporate shareholders. As Edward Stringham (2015) notes, "companies with transferable shares date back to classical Rome, but these were usually not enduring endeavors and no considerable secondary market existed (Neal, 1997, p. 61)."
Usually, the securities of a publicly traded company are owned by many investors while the shares of a privately held company are owned by relatively few shareholders. A company with many shareholders is not necessarily a publicly traded company. In the United States, in some instances, companies with over 500 shareholders may be required to report under the Securities Exchange Act of 1934; companies that report under the 1934 Act are generally deemed public companies.
Public companies possess some advantages over privately held businesses.
Many stock exchanges require that publicly traded companies have their accounts regularly audited by outside auditors, and then publish the accounts to their shareholders. Besides the cost, this may make useful information available to competitors. Various other annual and quarterly reports are also required by law. In the United States, the Sarbanes–Oxley Act imposes additional requirements. The requirement for audited books is not imposed by the exchange known as OTC Pink.The shares may be maliciously held by outside shareholders and the original founders or owners may lose benefits and control. The principal-agent problem, or the agency problem is a key weakness of public companies. The separation of a company's ownership and control is especially prevalent in such countries as U.K and U.S.
In the United States, the Securities and Exchange Commission requires that firms whose stock is traded publicly report their major shareholders each year.The reports identify all institutional shareholders (primarily, firms owning stock in other companies), all company officials who own shares in their firm, and any individual or institution owning more than 5% of the firm's stock.
For many years, newly created companies were privately held but held initial public offering to become publicly traded company or to be acquired by another company if they became larger and more profitable or had promising prospects. More infrequently, some companies — such as investment banking firm Goldman Sachs and logistics services provider United Parcel Service (UPS) — chose to remain privately held for a long period of time after maturity into a profitable company.
However, from 1997 to 2012, the number of corporations publicly traded on American stock exchanges dropped 45%.According to one observer (Gerald F. Davis), "public corporations have become less concentrated, less integrated, less interconnected at the top, shorter lived, less remunerative for average investors, and less prevalent since the turn of the 21st century". Davis argues that technological changes such as the decline in price and increasing power, quality and flexibility of computer Numerical control machines and newer digitally enabled tools such as 3D printing will lead to smaller and more local organization of production.
A group of private investors or another company that is privately held can buy out the shareholders of a public company, taking the company private. This is typically done through a leveraged buyout and occurs when the buyers believe the securities have been undervalued by investors. In some cases, public companies that are in severe financial distress may also approach a private company or companies to take over ownership and management of the company. One way of doing this would be to make a rights issue designed to enable the new investor to acquire a supermajority. With a super-majority, the company could then be relisted, i.e. privatized.
Alternatively, a publicly traded company may be purchased by one or more other publicly traded companies, with the target company becoming either a subsidiary or joint venture of the purchaser(s), or ceasing to exist as a separate entity, its former shareholders receiving compensation in the form of either cash, shares in the purchasing company or a combination of both. When the compensation is primarily shares then the deal is often considered a merger. Subsidiaries and joint ventures can also be created de novo — this often happens in the financial sector. Subsidiaries and joint ventures of publicly traded companies are not generally considered to be privately held companies (even though they themselves are not publicly traded) and are generally subject to the same reporting requirements as publicly traded companies. Finally, shares in subsidiaries and joint ventures can be (re)-offered to the public at any time — firms that are sold in this manner are called spin-outs.
Most industrialized jurisdictions have enacted laws and regulations that detail the steps that prospective owners (public or private) must undertake if they wish to take over a publicly traded corporation. This often entails the would-be buyer(s) making a formal offer for each share of the company to shareholders.
The shares of a publicly traded company are often traded on a stock exchange. The value or "size" of a company is called its market capitalization, a term which is often shortened to "market cap". This is calculated as the number of shares outstanding (as opposed to authorized but not necessarily issued) times the price per share. For example, a company with two million shares outstanding and a price per share of US$40 has a market capitalization of US$80 million. However, a company's market capitalization should not be confused with the fair market value of the company as a whole since the price per share are influenced by other factors such as the volume of shares traded. Low trading volume can cause artificially low prices for securities, due to investors being apprehensive of investing in a company they perceive as possibly lacking liquidity.
For example, if all shareholders were to simultaneously try to sell their shares in the open market, this would immediately create downward pressure on the price for which the share is traded unless there were an equal number of buyers willing to purchase the security at the price the sellers demand. So, sellers would have to either reduce their price or choose not to sell. Thus, the number of trades in a given period of time, commonly referred to as the "volume" is important when determining how well a company's market capitalization reflects true fair market value of the company as a whole. The higher the volume, the more the fair market value of the company is likely to be reflected by its market capitalization.
Another example of the impact of volume on the accuracy of market capitalization is when a company has little or no trading activity and the market price is simply the price at which the most recent trade took place, which could be days or weeks ago. This occurs when there are no buyers willing to purchase the securities at the price being offered by the sellers and there are no sellers willing to sell at the price the buyers are willing to pay. While this is rare when the company is traded on a major stock exchange, it is not uncommon when shares are traded over-the-counter (OTC). Since individual buyers and sellers need to incorporate news about the company into their purchasing decisions, a security with an imbalance of buyers or sellers may not feel the full effect of recent news.
A stock exchange, securities exchange, or bourse is a facility where stockbrokers and traders can buy and sell securities, such as shares of stock and bonds and other financial instruments. Stock exchanges may also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividends. Securities traded on a stock exchange include stock issued by listed companies, unit trusts, derivatives, pooled investment products and bonds. Stock exchanges often function as "continuous auction" markets with buyers and sellers consummating transactions via open outcry at a central location such as the floor of the exchange or by using an electronic trading platform.
A capital market is a financial market in which long-term debt or equity-backed securities are bought and sold. Capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments. Financial regulators like Securities and Exchange Board of India (SEBI), Bank of England (BoE) and the U.S. Securities and Exchange Commission (SEC) oversee capital markets to protect investors against fraud, among other duties.
A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, and precious metals.
A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages the term "security" is commonly used in day-to-day parlance to mean any form of financial instrument, even though the underlying legal and regulatory regime may not have such a broad definition. In some jurisdictions the term specifically excludes financial instruments other than equities and fixed income instruments. In some jurisdictions it includes some instruments that are close to equities and fixed income, e.g., equity warrants.
A stock market, equity market or share market is the aggregation of buyers and sellers of stocks, which represent ownership claims on businesses; these may include securities listed on a public stock exchange, as well as stock that is only traded privately, such as shares of private companies which are sold to investors through equity crowdfunding platforms. Investment in the stock market is most often done via stockbrokerages and electronic trading platforms. Investment is usually made with an investment strategy in mind.
Initial public offering (IPO) or stock market launch is a type of public offering in which shares of a company are sold to institutional investors and usually also retail (individual) investors. An IPO is underwritten by one or more investment banks, who also arrange for the shares to be listed on one or more stock exchanges. Through this process, colloquially known as floating, or going public, a privately held company is transformed into a public company. Initial public offerings can be used to raise new equity capital for companies, to monetize the investments of private shareholders such as company founders or private equity investors, and to enable easy trading of existing holdings or future capital raising by becoming publicly traded.
A corporate action is an event initiated by a public company that brings or could bring an actual change to the securities—equity or debt—issued by the company. Corporate actions are typically agreed upon by a company's board of directors and authorized by the shareholders. For some events, shareholders or bondholders are permitted to vote on the event. Examples of corporate actions include stock splits, dividends, mergers and acquisitions, rights issues, and spin-offs.
An American depositary receipt is a negotiable security that represents securities of a company that trades in the U.S. financial markets.
In financial markets, a share is a unit used as mutual funds, limited partnerships, and real estate investment trusts. The owner of shares in the company is a shareholder of the corporation. A share is an indivisible unit of capital, expressing the ownership relationship between the company and the shareholder. The denominated value of a share is its face value, and the total of the face value of issued shares represent the capital of a company, which may not reflect the market value of those shares.
Penny stocks, also referred to as micro-cap stocks, nano-cap stocks, small cap stocks, or OTC stocks, are common shares of small public companies that trade for less than one dollar per share.
Securities market is a component of the wider financial market where securities can be bought and sold between subjects of the economy, on the basis of demand and supply. Securities markets encompasses stock markets, bond markets and derivatives markets where prices can be determined and participants both professional and non professional can meet.
A rights issue or rights offer is a dividend of subscription rights to buy additional securities in a company made to the company's existing security holders. When the rights are for equity securities, such as shares, in a public company, it is a non-dilutive(can be dilutive) pro rata way to raise capital. Rights issues are typically sold via a prospectus or prospectus supplement. With the issued rights, existing security-holders have the privilege to buy a specified number of new securities from the issuer at a specified price within a subscription period. In a public company, a rights issue is a form of public offering. Sometimes Right issue can give privileges to people like director, employees those are having some ownership in company to buy the issues.
A reverse takeover or reverse merger takeover is the acquisition of a public company by a private company so that the private company can bypass the lengthy and complex process of going public. The transaction typically requires reorganization of capitalization of the acquiring company. Sometimes, conversely, the private company is bought by the public listed company through an asset swap and share issue.
Business valuation is a process and a set of procedures used to estimate the economic value of an owner's interest in a business. Valuation is used by financial market participants to determine the price they are willing to pay or receive to effect a sale of a business. In addition to estimating the selling price of a business, the same valuation tools are often used by business appraisers to resolve disputes related to estate and gift taxation, divorce litigation, allocate business purchase price among business assets, establish a formula for estimating the value of partners' ownership interest for buy-sell agreements, and many other business and legal purposes such as in shareholders deadlock, divorce litigation and estate contest. In some cases, the court would appoint a forensic accountant as the joint expert doing the business valuation.
Jefferies Group LLC is an American multinational independent investment bank and financial services company that is headquartered in New York City. The firm provides clients with capital markets and financial advisory services, institutional brokerage, securities research, and asset management. This includes mergers and acquisitions, restructuring, and other financial advisory services. The Capital Markets segment also includes its securities trading and investment banking activities.
Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of securities laws.
The Tehran Stock Exchange (TSE) is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of May 2012, 339 companies with a combined market capitalization of US$104.21 billion were listed on TSE. TSE, which is a founding member of the Federation of Euro-Asian Stock Exchanges, has been one of the world's best performing stock exchanges in the years 2002 through 2013. TSE is an emerging or "frontier" market.
Amman Stock Exchange (ASE) is a stock exchange private institution in Jordan. It is named "Amman" after the country's capital city, Amman.
Share repurchase is the re-acquisition by a company of its own shares. It represents a more flexible way of returning money to shareholders.
Stock of a corporation, is all of the shares into which ownership of the corporation is divided. shares are very very small portions of a corporation which gives you small ownership of the Company. In American English, the shares are collectively known as "stock." A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the stockholder to that fraction of the company's earnings, proceeds from liquidation of assets, or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders.