Public company

A public company is a company whose shares are sold to the general public. The owners of public company are its shareholders. Sometimes a private company "goes public" so it can sell more shares to more shareholders.

Public companies are entities whose stocks are traded on the public exchange market. Investors can acquire ownership in these companies by purchasing shares of their stock. The defining characteristic of a public company is its accessibility to any interested investor who wishes to buy shares through the public exchange. These shareholders have the right to participate in the company's decision-making processes, including voting in annual general meetings (AGMs) to elect new members of the board of directors, discuss policies, and set new goals and rules that shape the company's operations. Shareholders also receive a portion of the company's profits, with dividends distributed according to the number of shares held.

Becoming a public company entails undergoing an Initial Public Offering (IPO), a process that requires approval from regulatory bodies such as the Securities and Exchange Commission (SEC) and compliance with various regulatory standards. The primary objective of an IPO is to raise capital for the issuing company by offering shares to the public for purchase.

The Dutch East India Company is often called the first public company.

Advantages

• Raise funds by selling stockː Public companies have the opportunity to raise funds through both primary and secondary markets, where the investing public can buy shares of the company. This accessibility to public exchanges empowers public companies to engage in capital-intensive endeavors, as they can secure substantial amounts of capital. In exchange for their investment, shareholders stand to gain from the appreciation of stock value, known as capital gains, and may also receive dividends as a share of the company's profits.
• Accessibility of financial informationː Public companies must submit quarterly and annual financial statements, along with other essential documents, to the Securities and Exchange Commission (SEC). This regulatory obligation serves to provide shareholders, financial media, interested investors, and financial analysts with access to comprehensive information about the company's performance and financial health. The accessibility of this financial data facilitates analysts in assessing the company's valuation with greater precision.

Disadvantages

• Increased government and regulatory scrutinyː They are mandated to adhere to rigorous reporting standards established by governmental entities like the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS). This ensures transparency and accountability in their operations and financial activities.
• Strictly adhere to global accounting standardsː Public companies must strictly adhere to global accounting standards, necessitating the preparation of financial reports in compliance with either the Generally Accepted Accounting Principles (GAAP) or the International Financial Reporting Standards (IFRS). Additionally, shareholders are entitled to access key documents detailing the company's business activities. This commitment to transparency ensures that stakeholders have access to accurate and reliable information regarding the company's financial performance and operations.