Private company versus public company
A public company has securities offered to the public or subject to a public framework; a private company is held privately.
Tradable shares allow investors to buy and sell on the market. Public companies have reporting obligations, but reporting and oversight do not guarantee success. A private company is not necessarily small, and a public company is not necessarily government-owned. Trading between investors is not always new money entering the company.
Buying from another investor on the stock exchange usually transfers the proceeds to the seller. Issuing new shares by the company can raise money for the company.
Explain the example in your own words and check the calculation.
Investor.gov · Public Companies ↗Check your understanding
Is a public company necessarily a government company?
- Yes
- No
- Only in Israel
Answer and explanation
No. "Public" and "government-owned" are different concepts.
In a normal purchase from another investor on the stock exchange, who receives the proceeds?
- Usually the seller
- Always the company itself
- Always the state
Answer and explanation
Usually the seller. This is a secondary market transaction between securities holders.