Go public – definition and meaning

To go public, in business, means to progress from being a private to public company. A public company is one whose shares members of the public can trade on a stock exchange. In other words, anybody, as long as they have the money, can buy the shares of publicly-listed companies. To trade means to buy and sell.

You can only buy shares of private companies, on the other hand, by arrangement with their board of directors.

When a company goes public, it launches an IPO. IPO stands for Initial Public Offering. We also call it a stock market launch. IPOs, therefore, convert private companies into public ones. However, the IPO needs to be successful, because sometimes not enough people buy the new shares.

To go public also means to release information that was previously confidential to people or a group of people. This articles focuses on the term’s business meaning.

According to the Oxford Living Dictionaries, to go public means to:

“1. Become a public company, [as in] ‘the company’s share price has nearly quadrupled since it went public.’ 2. Reveal details about a previously private concern, [as in] ‘Bates went public with the news at a press conference.’”

What happens when companies go public?
It is usually significantly easier to buy and sell public company shares than those of private companies. It is also much simpler. In fact, all you have to do to purchase public company shares is to go to a recognized stock market.

To go public – pros and cons

There are some benefits and disadvantages to going public.

Pros

When a company goes public, new investors generate money when they purchase newly-issued shares. This money, i.e., the primary offering, goes directly to the company.

Additionally, some of the initial private investors might decide to sell some of their shares (secondary offering).

Going public is, therefore, a lucrative way for a business to attract new investors who can provide a company with capital. New capital subsequently helps businesses grow more rapidly.

Below is a highlighted list of the main advantages of going public:

  • The business has relatively cheap access to capital.
  • The company enjoys increased exposure, i.e., more people know and talk about it.
  • The process diversifies the company’s equity base. In other words, it subsequently has a broader range of investors or shareholders.
  • Most businesses find it easier to retain top management if they go public.
  • After going public, businesses have greater financing opportunities.
  • It facilitates acquisitions.

Cons

Going public is extremely complex. Many companies that decided to go public mentioned its complexity as the main disadvantage.

Before deciding to start the IPO process, companies must have a solid idea of their core business functions. The process of going public can be extremely time-consuming.

Below are some highlighted disadvantages to going public:

  • It can be very expensive.
  • The company needs to disclose all its financial information.
  • There are some serious risks. For example, your company may not meet its funding targets.
  • When a company goes public, its owners lose control. After the IPO, if it is successful, they have to answer to shareholders.

Giant IPOs

The largest IPOs of all time globally were:

1. Alibaba ($21.8 billion) in 2014. Alibaba is a giant Chinese Internet company.

2. Agricultural Bank of China ($22.1 billion) in 2010.

3. Industrial and Commercial Bank of China ($21.9 billion) in 2006.

4. American International Assurance ($20.5 billion) in 2010. American International Assurance is a Hong-Kong based, pan-Asian life insurance group.

5. Visa (($17.9 billion) in 2008. Visa is an American credit card multinational.

6. General Motors ($18.15 billion) in 2010. General Motors is an American multinational vehicle maker. It also sells financial services.

7. NTT DoCoMo ($18 billion) in 1998. NTT DoCoMo is a Japanese mobile phone operator.

8. Enel ($16.5 billion) in 1999. Enel is an Italian energy company.

9. Facebook ($16 billion) in 2012. Facebook is an American multinational social networking company.

Video – How to Go Public

This PwC video claims to have everything you need to know about going public, i.e., doing an IPO. It shows you the steps to get there efficiently. It also gives us a glimpse of what it is like for listed companies.