A company can be a public company or a private limited company.At present, people have started realising that enterpreneurship is more rewarding than conventional job.I have written an article on enterpreneurship .Hope you have gone through it,if not here is the link https://sidworld.in/can-you-become-a-enterpreneur-in-2022/.
Many people had started a small company in the beginning but it kept expanding and becoming larger and finally went public.In United States ,you can take the example of Amazon, Apple ,Facebook and many other companies .
In India you have the example of Zomato which was founded just in 2008 and now has a market capitalization of more than Rs.50000 crores or Nykaa which was started in 2012 and now has a market cap of nearly Rs.50000 crores after 50 % drop in its share price.
In general,companies that want to grow and expand have few ways to raise money:
- Borrow money and pay interest on it -Most firms start with a small capital and then take business loans to run the company .Most banks are always willing to give loans if the person submits all the required documents.And banks charge interest on it ranging from 12% to 25 %.
- Seek private investors with deep pockets who will seek profits in return of their investment :Private investors are also willing to invest in your company but your company should be appealling to them.They give the money but expects high profits in low duration which creates a pressure on the management of the firm.
- Go for public listing and raise money through the sale of shares in the company:The third option is to go to the public to raise money.But here also the market seeks good results from the public company otherwise the share prices fall and similarly,if the results beat the market expectation, the company is rewarded in the form of increasing stock prices.To list in the stock market ,certain rules have to be followed which are made by the government.It is generally called as IPO.https://www.fidelity.com/learning-center/trading-investing/trading/investing-in-ipos
Listing Gains- The investors of a public company gets benefited from listing gains because many times it has been seen that share price debuts in the stock market at a premuim compared to the allotment price. Thus investors make substantial gains on the listing day itself.
Liquidity- Investors can sell their shares anytime they want .Thus ,a public company provides liquidity to investors which is not generally seen in other form of investment like insurance and fixed deposits.
IPO Norms- The rules for a public company are safe and professional for protecting retail investors.The company’s prospectus consists of all the information like performace ,growth ,financials and future plans.So the investor can invest in a company after analysing all the data himself.
Exit opportunity- The early investors of a public company gets an opportunity to sell their shares at the market price .Usually their money or capital gets locked in when they invest in any company but when the same company goes for a public listing, the investors gets an opportunity to liquidate their initial investment.
Publicity and Credibility -The owner of the public company starts getting publicity and credibility also ,when the company goes public because everybody starts talking about them.Sometimes it may be investors or analylists from various companies all over the country talking about them.In they process they get free publicity for which similar companies have to pay in the form of advertisement.Thus people trust them more because when a company goes public,it has to pass through many layers of scrunity.
ESOPS- A public company also has the advantage of giving their employees their own company’s stocks.This way they are able to build trust with their top-level employees and retain them for longer periods .This is a very important point because most of the companies always face the problem of employee attrition and the problem worsens if the employee is from the management level.The employees also feel a sense of upliftment in their morale.This option is only for public company because their shares are already listed in the market.
Voting Rights- The best part of a public company is that the shareholders get to vote in the meeting conducted by the company.In the company’s annual general meeting ,the shareholders get to vote ,but only to the extent of the shares held by them .So,the more number of shares held the more is the voting right of the person.