Public Listed Company
A Public Listed Company is a publicly traded corporation that often gives its securities for trade to the public, usually by going public through an Initial Public Offering (IPO) and listing the shares in a stock market.
In this article, a brief overview of the Public Listed Company has been described. Additionally, the advantages, disadvantages, and features of the Public Listed Company have been discussed.
Overview of Public Listed Company
A Public Listed Company is one where shares are traded publicly, which means the shares can be sold relatively quickly and are accessible for purchase and selling by anybody in the open market. Publicly listed companies are also referred to as publicly traded organizations. Public listed companies have their shares registered on any share exchange market that permits the public to trade the shares, i.e., anyone can sell or purchase shares of these corporations in the open market.
It is a corporation with at least a single public share market listing and has provided shares to the general public in exchange for shares in the corporation. The business becomes publicly traded with the help of an Initial Public Offering(IPO).
The public is permitted to purchase a predetermined amount of the shares. However, the dominant stockholder maintains control. Going public entails selling stock in a secondary market. Buying and selling shares amongst shareholders may affect the corporation’s value as a whole. Because of the excessive expense of finance, most privately held businesses decide to become public after complying with all legal procedures. Some publicly traded businesses include Google, Apple, Amazon, Microsoft, and other businesses.
Features of a Public Listed Company
- Independent Legal Entity– A public company is a business with an independent legal existence from its owners or shareholders.
- A Public Listed Company’s establishment, functioning, and termination are all firmly governed by norms, guidelines, and legislation.
- Transfer of shares–Shares of a corporation can be freely transferred without the consent of other shareholders or further notification to the corporation. It means that the transfer of shares in a Public Listed Company is not subject to any limitations.
- Limited liability– The amount of the shareholders’ liability is capped by the market value of the number of shares they possess. In the event that the firm suffers losses or debts, each shareholder in a public business is only accountable for their investment in shares, not more.
- Perpetual succession– The business will always exist. In other words, when the investors, executives, and employees may change, the business will continue to remain active. The business never expires because of death or infirmity. It continues as long as the business is not shut down or dissolved.
- Members- The public company must have at least 7 members. There is no limitation on the maximum number of members.
- Directors- A public business may have at least three directors, and there is no upper limit to the maximum number of directors. They should have the Director Identification Number (DIN) that is permitted by the Ministry of Corporate Affairs (MCA).
- Borrowing ability- The ability of the public corporation to loan money from several sources is one of its best features. A public business can acquire funds by issuing secured or unsecured debentures. It can also offer stocks to the general public. Even banks and other financial organizations provide loans and other forms of funding to the business.
Advantages of the Public Listed Company
The advantages of the Public Listed Company are described below-
1. Raise capital
Most businesses often reach a point where they need to inject more capital to support their expansion and growth strategies. So one way to raise capital for firms is to become public. Companies will be able to raise a sizable amount of money via an IPO and following investment phases to fund their regular business operations, potential growth, sales, and capital costs. The corporation gains more shareholders and gains legitimacy by going public on a share market.
2. Improvement in worker morale
By raising exposure and enhancing public opinion of the company, going public boosts worker value and morale. It might also result in the employment of new employees.
3. Lowers debt
One of the advantages of a public listed company is that it may reduce debt by going public and can sell shares in order to reduce the interest payments, boosts working capital, and improve the debt-to-equity proportions to a significant level.
4. Mergers and acquisitions
When the corporation’s share is valued more, business mergers and acquisitions could be completed with fewer shares being traded for cash. An IPO or subsequent share offerings might be used to raise the finance necessary for mergers and acquisitions. Achievement in mergers and acquisitions produces efficiency and increases the earnings and revenues of the target company.
5. Enhances visibility
Going public enhances the business’s visibility and reputation among institutions and external investors due to adherence to numerous regulatory standards and the maintenance of openness while conducting business operations.
By encouraging liquidity, the listing of shares in the stock exchange increases stockholders’ ability to realize the market value of their shares. It enables stockholders to trade in the corporation’s shares, sharing risks and earning rewards from any rise in organizational value.
Listing of shares in a Public Listed Company increases the transparency and productivity of the business operations.
8. Disadvantages of a Public Listed Company
The disadvantages of a Public Listed Company are stated below-
9. Greater degrees of transparency are necessary
There is a greater degree of transparency in the case of a Public Listed Company. They have to get their accounts audited more carefully. In order to comprehend the progress of the shares of the stockholders, they desire accounting statements periodically. They should be finished before 6 months of the completion of the financial year. In order to prove accountability to a bigger audience than before, annual meetings must be conducted.
10. Being open to takeovers
A public listed company leaves the company vulnerable to takeovers. If a large number of investors accept a takeover effort, this is very crucial. It is significantly more challenging to manage who the shareholders in the company are. As a result, the company’s general orientation could change.
Disadvantages of the Public Listed Company
The list of disadvantages of the public listed company are:
Enhanced Inspection: Investors, analysts, and regulators always keep a close eye on publicly traded corporations. Any error or poor performance may result in bad press and a decline in the stock price.
Quick-Term Goals: Public corporations frequently experience pressure to meet analysts’ and investors’ expectations for outstanding quarterly earnings. This can cause an organization to prioritize short-term financial goals above long-term strategic planning.
The price of compliance: Financial reporting requirements and securities laws can be expensive to maintain compliance with. This includes the price of paying accountants, attorneys, and financial specialists to make sure the business is upholding its duties.
Control Issues: A company’s founders and early investors could lose some degree of influence over corporate decisions when it goes public. This may be particularly true if institutional investors or activist shareholders own a large percentage of the company’s stock.
An overview of a Public Listed Company is provided in the article that follows. It also goes over the characteristics, benefits, and drawbacks of a public listed company.
You can reach out to OnDemand International if you have any additional questions about publicly traded companies. We will be delighted to answer your questions.
A publicly listed company is one where shares are traded publicly, which means the shares can be sold relatively quickly and are accessible for purchase and selling by anybody in the open market.
- Raise money
- Boost staff morale
- reduces debt
- Acquisitions and mergers
- boosts transparency, liquidity, and visibility
- Increased levels of transparency are required.
- Vulnerable to takeovers
A Singapore Letter of Consent (LOC) is an authorization certificate issued by Singapore’s Ministry of Manpower (MOM) that allows eligible LTVP or LTVP+ holders and business owners to work for a Singapore company.