A privately held or unlisted company is an organization run by non-governmental entities or by a small number of shareholders or members. Most importantly, the shares are offered, traded and exchanged in private instead of trading the stock to the public through stock market exchanges. On the other hand, a publicly traded company or a public company offers its stocks to the general public through stock exchanges or market makers earning the confidence of investors. Normally, the stock market sets the value for these shares based on the price range decided by the underwriters. However, publicly traded companies are different from publicly owned companies. While the former is under private ownership, the latter is owned by the government.
More number of private companies opting to public every day due to the potential to raise capital for expansion and internal development. By issuing IPOs, any private company which has gained the confidence of the public can raise funds by selling them a chunk of the organization in the form of securities. Since the underwriter syndicate decides the price range of each stock based on the recent performance of the company, the buyer can safely invest in these. Another advantage of public companies, from the buyer perspective, is that the public nature of the company ensures accountability. As soon as a share is bought, the company becomes answerable to its stockholders. Every public company has to provide periodic information about the finances and profits. SEC mandates an annual submission of Form-10K, which consists of detailed information regarding the company's performance in the previous year. On the flip side, all public companies need to perform extensive paperwork and bookkeeping. Read More...