• May 2019
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Public Company

A corporation that has completed the process of issuing securities through an initial public offering and now trades at least some of its authorized shares on a minimum of one stock exchange and/or over-the-counter market.

When a corporation is legally structured, its initial shares are privately held. Most of the time, those shares are primarily held by investors in the company, the company’s founders and/or high-level employees within the business. In an effort to raise capital and/or allow public trading of authorized shares, a private corporation may choose to hold an initial public offering. Registering securities with the U.S. Securities and Exchange Commission is also known as “going public.” Until a corporation transitions from private to public, the general public cannot invest in its operations and benefit financially from its successes.

Public companies are subject to strict disclosure and reporting requirements as enforced by the SEC. These mandates aim to keep investors and potential investors informed about material information that may affect the value of the company’s shares for better or for worse.

 

EXAMPLE:

Although Facebook was founded in 2004, it did not become a public company until its IPO in 2012. By that time, the company’s reputation and overall worth helped to ensure that it had the most financially profitable tech-related IPO in U.S. history.