A public traded company, also known as a publicly traded company or public company, is one whose shares are listed and traded on a stock exchange. It allows the general public to buy and sell shares of the company, making ownership accessible to external investors. Public companies must adhere to stringent regulatory requirements and disclosure norms to ensure transparency in financial reporting and governance.
Advantages of public companies
Access to capital: Ability to raise funds from a large pool of investors through public offerings.
Liquidity: Shares can be easily bought and sold on stock exchanges, providing liquidity to shareholders.
Enhanced visibility: Public listing enhances company reputation and visibility in the market.
Employee incentives: Can offer stock options and equity-based compensation to attract talent.
Mergers and acquisitions: Increased ability to pursue mergers and acquisitions using stock as currency.
Disadvantages of public companies
Regulatory compliance: Subject to extensive regulatory requirements and reporting obligations.
Shareholder pressure: Pressures to meet quarterly earnings expectations and shareholder demands.
Loss of control: Dilution of control as ownership spreads among numerous shareholders.
Costly compliance: High costs associated with compliance, legal fees, and regulatory filings.
Market volatility: Vulnerable to market fluctuations and investor sentiment, impacting stock price stability.
How do publicly traded companies work?
Publicly traded companies issue shares through an initial public offering (IPO) to raise capital from investors. These shares are then traded on stock exchanges where buyers and sellers determine their prices. The company's management, led by a board of directors, oversees operations and strategic decisions, aiming to maximize shareholder value. Public companies must comply with stringent regulatory requirements, including financial reporting and governance standards, to maintain transparency and investor confidence.
Examples of public traded companies
Apple Inc. (AAPL): A technology giant known for its iPhones, iPads, and Mac computers.
Microsoft Corporation (MSFT): Develops software products like Windows and Office, and offers cloud services through Azure.
Amazon.com Inc. (AMZN): A global e-commerce and cloud computing company.
Tesla Inc. (TSLA): Specialises in electric vehicles and renewable energy solutions.
Alphabet Inc. (GOOGLE): The parent company of Google, focused on internet-related services and products.
How to start a public traded company in India?
Starting a public traded company in India involves a structured process governed by regulatory frameworks and market requirements. From incorporation to IPO issuance and listing on stock exchanges, each step demands careful planning and compliance with SEBI guidelines to ensure transparency and investor confidence. If you’re ready with your business ideas and business plans, here are the steps to follow:
Incorporate your company
Register your company under the Companies Act, 2013. Choose a suitable business structure (e.g., private limited or public limited) and obtain necessary approvals from the Registrar of Companies (RoC).
Prepare prospectus and get approvals
Draft a detailed prospectus outlining company operations, financials, and IPO terms. Obtain approvals from regulatory bodies like SEBI (Securities and Exchange Board of India) for the IPO.
Issue shares via IPO
Offer shares to the public through an Initial Public Offering (IPO) to raise capital. Price shares are based on market demand and investor interest.
List shares on stock exchange
Apply for listing on recognized stock exchanges such as BSE (Bombay Stock Exchange) or NSE (National Stock Exchange). Meet listing criteria and comply with exchange regulations.
Comply with regulatory requirements
Fulfill ongoing compliance obligations including financial reporting, disclosure norms, and corporate governance standards as mandated by SEBI and stock exchanges.
Conclusion
Starting a public traded company in India involves meticulous planning, regulatory adherence, and strategic execution. Securing a business loan can facilitate initial capital needs for incorporation, IPO expenses, and compliance costs, crucial for achieving successful public listing and sustained market presence.
