CEOs, directors and most everyone invested in the success of a corporation likes to see the business grow. Many senior leadership teams in corporations develop some sort of growth strategy. Certain strategies succeed, while others may not deliver as expected.
One component of some growth strategies is the ability to raise money in order to fund new ventures or initiatives. A common way to raise money quickly is by offering the sale of company shares to the public.
A privately held company is exactly that – a company with private owners who have invested in the company. However, once a business seeks investments from external parties, or “the public,” the company is now accountable to these public stockholders.
What is a public stockholder?
In order to get investments from the public, a company “goes public,” which means they offer shares in of their company to the public, traded on a stock exchange. This is known as an IPO, or an “initial public offering”.
Once someone from the public buys a share of the company, they are now a partial owner of that company. These public owners can choose to sell their shares to others when they see fit. In order to make sure stockholders stay up to date on their investment, a company needs to provide key information, such as annual reports, and give stockholders certain privileges.
Is this the right decision for you?
If you are considering opening your company up from a private company to a public company, it’s best to consult with an experienced corporate lawyer. They can help you understand the responsibilities, risks and liabilities that go into this type of business offering, and how to optimize this strategy for your company.