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Public vs. Private Companies

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(@amandaally1029)
Posts: 40
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What is the difference between public and private companies? Based on their differences, what are some pros and cons of each? Give an example of a private and public company, and state the successes.

 
Posted : 10/10/2017 2:18 pm
 zbw2
(@zbw2)
Posts: 47
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A company's success is not dependent on whether or not it is publiclt traded. In fact the decision to go public is usually made based on how the owner(s) is/are seeking to profit. Many business owners make their fortune by selling some part of their company. Before a company is sold or goes public, it is evaluated as a multiple of its 10 year discounted cash flow. When a private company is sold, the sale price is directly based on this evaluation. When a company goes public this evaluation is still done to set the value of the initial public offering(IPO) of the stock, however, the majority owners can then sell shares any time thereafter at the stock's market value, which is largely based on a company's publicaly percieved value.

Generally speaking, taking on investors and going public is often a faster track to income. While private companies tend to be more successful in the long term. Going public,however, also mandates that the company be a corporation, which requires a board of directors. This is a slippery slope as the board decreases autonomy and can lead to eventually being ousted from your own company. This can occur because the board and shareholders have a say in who runs the company and how things are run.

 
Posted : 11/10/2017 8:27 am
(@srg36)
Posts: 117
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The difference between public and private companies is public companies have shares that can be publicly traded on the stock market, whereas the private companies are not traded publicly on the stock market.

Public:
Pro: focused on increasing the value of the company to make it more desirable for investors
Con: must disclose corporate financial information

Private:
Pro: do not have to disclose corporate financial information
Con: not as focused on increasing the value of the company since there are very few shareholders

IKEA is an example of a successful private company, and Apple is an example of a successful public company.

 
Posted : 11/10/2017 8:30 am
(@mark-abdelshahed)
Posts: 80
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A private company can be a corporation, a limited liability company, a partnership, or a sole proprietorship, as long as the shares are privately held and not traded publicly. Although private companies are legally required to file certain documents with their state and follow required compliance laws for shareholders, public companies must follow strict government regulations. Private companies are not required to publicly disclose financial information, while public companies are required by the Securities and Exchange Commission to file an annual report documenting their performance in detail. Because private companies don’t have to disclose financial information, they can focus on long-term growth instead of making sure shareholders are getting their quarterly dividends. Private companies don’t need shareholder approval for operational and growth strategy decisions made by the company, as long as that is stated in their corporate documents.
Zara is an example of a successful private company because of their constant levels of new products, clear strategy around discounting, focusing on core customers, consistency in price architecture, and communicating your brand's identity.
Public companies must inform shareholders about and get approval for the company’s operations, financial performance, management actions, and other decisions. Going public is expensive, and there is unlimited liability for a company’s owners. Public companies may have an easier time raising large amounts of capital by selling securities. Investors are more likely to invest in a public company because there is less risk and more potential to reap large rewards. Public companies can return to the stock market and raise more capital via a secondary stock offering or by issuing a bond. Public companies must comply with the rules established by the Sarbanes-Oxley Act, which was enacted to protect investors. The act contains a myriad of regulations concerning board responsibilities and requires the Securities and Exchange Commission to administer rules that comply with the law. Public companies can go private by having the owners buy back shares from the shareholders, whether they are members of the public, another company, an individual, or a small group of investors.
Apple is an example of a successful public company because their products are easy to use, they keep things simple, and offer great customer service.

 
Posted : 11/10/2017 4:04 pm
(@dbonanno1)
Posts: 36
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The major difference between public and private companies, is that public companies have shares that can be publicly traded on the stock market. A private company might become a public company by conducting an initial public offering, which is when shares of the company are offered to the public. Becoming a public company entails a number of changes to the firm which includes changes to management, business strategy, valuation methods and legal obligations. Public companies tend to be run by a board of directors because once a company goes public the main goal is to increase shareholder value. Private companies are less focused on increasing the value of the company because only a limited number of shareholders exist. For private companies instead of having a board of directors, the business decisions are undertaken by either the business owners or investors. Since managers are less focused on increasing the value of the company in the short term (like public companies), it allows them to have an increased flexibility in the short and long term business decisions. An example of a public medical device company would be Becton Dickinson (BD) which trades on the NYSE (New York Stock Exchange) under “BDX”. An example of a private medical device company would be Biomet.

 
Posted : 12/10/2017 5:44 pm
(@lianhuajin)
Posts: 39
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A public corporation is a business whose securities are traded on the public stock exchanges. A private company is held solely by its owners and is not traded publicly.
A big difference between private and public companies involves public disclosure. A public U.S. company trades on a stock exchange and must file quarterly earnings reports with the SEC that are accessible to shareholders and the public. Private companies do not trade on an exchange. They are not required to disclose their financial information or file disclosure statements with the SEC.

Public companies have the advantage of raising capital by selling stock or issuing bonds. Private companies don’t have that luxury. When they need capital, private companies turn to private funding, which can boost the cost of capital or limit expansion.

Some companies want to stay private. For example, United Parcel Service keep private from its founding in 1907 until it went public in 1999. While the majority of the first shareholders probably didn't fully recognize the value of their shares, they found out when the stock started trading on a public exchange and its price was determined by public demand.

 
Posted : 13/10/2017 6:46 pm
(@hc255)
Posts: 74
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Main difference between a public and private company is that a public company sells a part of its business to the public through public offerings. A private company is owned by a handful of people. This handful of people usually includes the founder and other investors. Public companies often are faced with the pressure from the market they are involved in. This may often put public companies in a short term goal oriented thinking to keep up with the market pressure. Public companies therefore, must adequately produce profit to ensure that investors stay. A private company can vary between company types such as corporations, LLCs, partnerships, etc. Private companies are legally required to file certain documents within their state and be in compliance with regulations depending on state. However, private companies are not required to submit financial information publicly, whereas public companies must submit by the Securities and Exchange Commission within an annual report. This allows private companies to focus on long term goals/reach, different than public companies. An example of a private company would be Deloitte. A big four of largest professional accounting firms in the world, Deloitte earned a record $38.8 billion USD in revenue. An example of a successful public company would be Chevron Corp.

 
Posted : 14/10/2017 11:26 am
(@anhtong)
Posts: 38
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A major merit difference I have noted in public and private Limited Liability companies is the prestige that comes along with bearing a "PLC" at the end of their name Whether deserved or not, having ‘plc’ at the end of a company name can add standing and prestige. There is a sense of status about a public limited company that its private company counterpart just doesn’t quite have, which can affect how the business is viewed. While often more imagined than real, this perception of being more established, larger or more powerful can affect the behaviour of customers, suppliers and employees.

Although they pay for all these perks thorough investor pressure, and having to plan short term all the time just to make enough profit

 
Posted : 14/10/2017 11:36 am
(@kak33)
Posts: 58
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I read this article about how a company was ready to go public and I thought it was interesting. From what I understand going public must be a timely decision. Completing an IPO too early can have disastrous effects on the future health of you’re the business and waiting too long might allow a competitor to steal your thunder.

There used to be a standard that companies were ready to go public when they reached $100 million in annualized revenue. At that point, it is assumed that the company 1) is able to handle competition and 2) earn a large enough market value to enable the company to sell enough stock to institutional buyers in its IPO, without suffering massive dilution in the process.

In this article the keys to knowing when you are ready are:
• Predictability & Visibility
• Underlying Growth Potential
• Vulnerability Assessment

According to this article, it doesn’t matter what if you have $ 200 million in revenue if you can not predict, with high precision, what next quarter or next year is going to look like. Once you are public, if the company misses guidance or analyst expectations by 3%, stock will likely plummet, often causing employee morale to suffer and competitors to be emboldened. Additionally, the company must be aware of their growth potential because the IPO is not the end goal. The company may not know all the growth vectors they plan to open up in the future, but they should have a game plan before the IPO. The best companies have no single points of failure. Public investors hate when companies have all of their eggs in one basket. Risks like having 1 or 2 large customers, a dominant supplier or distributor, huge competitor, or if the company is limited to single platform, technology or regulatory regime gives other companies the ability to extract a lot of value once they realize the comply relies on them.

http://fortune.com/2013/02/25/is-your-company-ipo-ready/

 
Posted : 14/10/2017 1:33 pm
 hv42
(@hv42)
Posts: 42
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The principal difference between public and privately held companies is that public companies have shares that can be publicly traded on a stock market. A privately held company might become a publicly held company by conducting an initial public offering, which is the offering of shares of the company to the public.
The main advantage public companies have is their ability to tap the financial markets by selling stock to raise capital for expansion and projects. The main advantage of private companies is that management doesn't have to answer to stockholders and isn't required to file disclosure statements with the SEC. However, a private company can't dip into the public capital markets and must therefore turn to private funding. It has been said often that private companies seek to minimize the tax bite, while public companies seek to increase profits for shareholders. But Public companies also are faced with the added pressure of the market which may cause them to focus more on short-term results rather than long-term growth. The actions of the company's management also become increasingly scrutinized as investors constantly look for rising profits. This may lead management to use somewhat questionable practices in order to boost earnings.

Examples: -
Public Company = Colgate Palmolive
Colgate Palmolive Company world wide Net sales of $3,762 million in first quarter 2017, even with the first quarter 2016 level. Global unit volume decreased 2.0%, pricing increased 2.5% and foreign exchange was negative 0.5%. Organic sales grew 0.5%

Private Company = Medline Industries
Medline is one of 11 organizations across the country honored by United Healthcare
Seventh annual Well Deserved award recognizes employers for their commitment to wellness programs that enable employees to take an active role in their health and well-being.

 
Posted : 14/10/2017 5:40 pm
(@rachelpatel1796)
Posts: 43
Eminent Member
 

The main difference between a public and a private corporation is that the public corporation have shares that can be traded and enlisted in the stock market. There are also differences in the management between the two. Public corporations are usually ran by a board of directors. Thus these companies are usually run by professionals that specialize in increasing the shareholder value. Private companies are less focused on increasing the value since less shareholders are with them. Instead of the business owners, private companies have business owners and investors that will manage the company. Public companies also must disclose financial information due to legal requirements on a quarterly basis. Also a disadvantage of a privately owned company is that the value of the company may fluctuate since less is known about firm and investors.

Facebook is an example of a public company since it is on NASDAQ. The company's earning grew around 50% in the most recent quarter, which is spectacular for a company that is already very big.

An example of a private company is MARS, INC. Mars is a very successful company, having chocolate and food being sold all over the world. It was the first confectionery company to launch a front of pack nutrition labeling globally. As of now, especially when halloween candies are being bought, I would say they are doing very well and are very successful on the market.

 
Posted : 14/10/2017 5:54 pm
(@akashranpura)
Posts: 39
Eminent Member
 

There are several differences between public and private companies. One of the main differences is that public companies will have shares in the open tradable market. Private companies’ goals are not likely to focus on increasing value of the company. This is because there are few shareholders. However, public companies will try to do their best to increase their share prices. Also public companies are more likely to have to disclose corporate finances. This is because the public must trade on this company and therefore will need to have such information. One publicly held company is General Electric. One privately held company is Ikea.

 
Posted : 14/10/2017 6:55 pm
(@krp76)
Posts: 76
Trusted Member
 

Public vs Private companies, the largest difference between the two is that private companies are not publicly traded, while public companies have shares traded on exchange funds available to the public. The main reason a company chooses to go public is to raise capital in order to continue to grow and expand the company. The pro behind the move to go public is the obvious increase in capital that allows the company to grow at a faster rate, potentially. However, the setback is that you now report to shareholders and have less control over the company. In the end the key difference and largest pro/con comes down to the direction the company is headed and the largest decision to make is whether the company values growth/capital over influence/control.

 
Posted : 15/10/2017 10:23 am
(@ronakmandaliya)
Posts: 33
Eminent Member
 

As I mentioned in previous post, I think there is more room for growth in private and small company because the company itself is growing and you grow with it. You learn to become a leader, because you need to finish certain projects while being on budget and not having a resources. While in corporation, your job is mostly safe because the company is big, but you are already given every resources you need to finish your project, so you don't really learn how to work under budget and how to do more things by yourself.

 
Posted : 15/10/2017 10:43 am
(@woolynn)
Posts: 36
Eminent Member
 

Private Company does not responsible for SEC, Sarbanes-Oxley, and Public Company Accounting Oversight Board, but Public Company has the response. The private company is owned by a few individuals, which is not traded public. It does not have to report their financial data. However, for the public company, they issued publicly traded stock, so they have many shareholders via an initial public offering (IPO), meaning shareholders have claimed to part of the company's assets and profits. They have to report financial data quarterly.
Private companies are not required to publicly disclose financial information, while public companies are required by the Securities and Exchange Commission to file an annual report documenting their performance in detail.
Because private companies don’t have to disclose financial information, they can focus on long-term growth instead of making sure shareholders are getting their quarterly dividends.
Private companies don’t need shareholder approval for operational and growth strategy decisions made by the company, as long as that is stated in their corporate documents.

The main advantage public companies have is their ability to tap the financial markets by selling stock (equity) or bonds (debt) to raise capital (i.e. cash) for expansion and projects. The main advantage of private companies is that management doesn't have to answer to stockholders and isn't required to file disclosure statements with the SEC. However, a private company can't dip into the public capital markets and must, therefore, turn to private funding. It has been said often that private companies seek to minimize the tax bite, while public companies seek to increase profits for shareholders.

Private companies: Cargill, Dell
Public companies: Apple, AT&T, BOA

 
Posted : 15/10/2017 10:54 am
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