A public company is a company whose ownership is organized via shares of stock which are intended to be freely traded on a stock exchange or in over-the-counter markets. A public (publicly traded) company can be listed on a stock exchange (listed company), which facilitates the trade of shares, or not (unlisted public company). In some jurisdictions, public companies over a certain size must be listed on an exchange. In most cases, public companies are private enterprises in the private sector, and "public" emphasizes their reporting and trading on the public markets.
Public companies are formed within the legal systems of particular states, and therefore have associations and formal designations which are distinct and separate in the polity in which they reside. In the United States, for example, a public company is usually a type of corporation (though a corporation need not be a public company), in the United Kingdom it is usually a public limited company (plc), in France a "" (SA), and in Germany an (AG). While the general idea of a public company may be similar, differences are meaningful, and are at the core of international law disputes with regard to industry and trade.
Securities
Usually, the securities of a publicly traded company are owned by many investors while the shares of a privately held company are owned by relatively few shareholders. A company with many shareholders is not necessarily a publicly traded company. Conversely, a publicly traded company typically (but not necessarily) has many shareholders. In the United States, in some instances, companies with over 500 shareholders may be required to report under the Securities Exchange Act of 1934; companies that report under the 1934 Act are generally deemed public companies.
Advantages and disadvantages
Advantages
Public companies possess some advantages over privately held businesses.
Publicly traded companies are able to raise funds and capital through the sale (in the primary or secondary market) of shares of stock. This is the reason publicly traded corporations are important; prior to their existence, it was very difficult to obtain large amounts of capital for private enterprises, as significant capital could only come from a smaller set of wealthy investors or banks willing to risk typically large investments. The profit on stock is gained in form of dividend or capital gain to the holders. The financial media, analysts, and the public are able to access additional information about the business, since the business is commonly legally bound, and naturally motivated (so as to secure further capital), to publicly disseminate information regarding the financial status and future of the company to its many shareholders and the government. Because many people have a vested interest in the company's success, the company may be more popular or recognizable than a private company. The initial shareholders of the company are able to share risk by selling shares to the public. If one were to hold a 100% share of the company, they would have to pay all of the business's debt; however, if an individual were to hold a 50% share, they would only need to pay 50% of the debt. This increases asset liquidity and the company does not need to depend on funding from a bank. For example, in 2013 Facebook founder Mark Zuckerberg owned 29.3% of the company's class A shares, which gave him enough voting power to control the business, while allowing Facebook to raise capital from, and distribute risk to, the remaining shareholders. Facebook was a privately held company prior to its initial public offering in 2012. If some shares are given to managers or other employees, potential conflicts of interest between employees and shareholders (an instance of principal–agent problem) will be remitted. As an example, in many tech companies, entry-level software engineers are given stock in the company upon being hired (thus they become shareholders). Therefore, the engineers have a vested interest in the company succeeding financially, and are incentivized to work harder and more diligently to ensure that success. Public companies by their fiduciary duty are legally forbidden from taking an action that may decrease the stock price or failing to take any action that may increase it. Perpetual growth is the goal of every public company.