Lesson 6 of 7 · All lessons in this module
- Equity versus debt, why companies issue shares, and equity in global markets
- Equity instruments: shareholder rights, the residual claim and equity cash flows
- Preference shares: cumulative, participating and convertibleVideo lesson
- Preference share contingencies: upside, downside, and how preference sits between debt and common
- Publicly listed versus private companies: why list, who stays private, and how the two differ
- Private versus public equity: venture capital, buyouts and PIPEs
- Private equity across the company life cycle: venture, growth, buyout, special situations and PIPE dilution
This lesson is part of the 2027 curriculum. You are following the 2026 curriculum, where it is not taught in this form. Switch if you are sitting the exam under the 2027 curriculum.
Lesson 6 of 7 · 11 min
Private versus public equity: venture capital, buyouts and PIPEs
Private equity trades away liquidity, price discovery and disclosure in exchange for a long-term focus and lower public-company costs; public equity offers deep capital, liquidity and scrutiny.
In short
- Private equity is issued mainly to institutional investors through private placements; there is no active secondary market, no market price, and trading requires negotiation.
- Private issuers usually need not publish financial statements, so fair value is hard to estimate.
- Three types: venture capital (seed, early-stage and mezzanine financing; exit in 3–10 years via IPO or sale), leveraged buyouts (LBO/MBO: buying a public company with heavy debt and taking it private) and PIPEs (private investment in public equity).
- Going private allows a long-term focus and removes costs of being public (filings, investor relations, analyst calls).
- Public markets are much larger and liquid, and public scrutiny pushes companies toward better corporate governance.
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