Los 20.c Flashcards
(7 cards)
What are public limited companies and how do they raise capital?
Public limited companies have shares listed on an exchange, allowing shares to be traded.
Shareholders can be individuals, corporations, nonprofits, or government entities.
Shares actively traded are called the company’s “free float.”
What are the features of a stock exchange?
A rules-based open market.
Provides price and volume transparency for securities trading.
What are the compliance requirements for public companies?
Public companies must file quarterly or annual financial reports.
They must disclose material changes in business or ownership.
How do private limited companies differ from public companies?
Shares are not traded on an exchange.
The value of shares is not readily observable, and share transfer is difficult.
Fewer regulatory requirements and less disclosure than public companies.
Investors often wait for the company to go public or be sold to exit investments.
How can private companies raise equity capital?
Through private placements of securities, usually restricted to accredited investors (corporate investors, institutions, high-net-worth individuals).
How can a private company become public?
By issuing shares in an initial public offering (IPO):
* A company issues shares to raise capital.
* The company must meet exchanges pecific requirements and typically engages an investment bank to underwrite the issue.
* After listing, shares are traded without direct involvement of the company.
By a direct listing, where existing shares are listed without raising new capital.
* A private company’s existing shares are listed on a stock exchange.
* No new capital is raised, and no underwriter is involved.
* It is quicker than an IPO.
Through acquisition by a special purpose acquisition company (SPAC).
* A SPAC is a company set up to acquire a private company.
* It raises capital through an IPO and must acquire a company within a specified time.
* SPACs are also known as “blank check” companies.
