Lesson 5 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 5 of 7 · 12 min
Publicly listed versus private companies: why list, who stays private, and how the two differ
Private companies vastly outnumber listed ones, but listed companies are worth far more; listing buys liquidity and capital at the price of listing requirements, disclosure and scrutiny, which is why many firms, even large ones, stay private.
In short
- Companies list to raise capital (e.g. for expansion), to let existing owners sell down concentrated stakes (founders, families, private equity owners) or, for state-owned firms, to transfer ownership to investors.
- Listed firms must meet and keep listing requirements: minimum size (market cap, sales or profit), a minimum number of shareholders, and standard disclosures such as audited financial statements.
- Only about 1 in 1,000 US corporations is publicly traded, yet public equity is worth roughly ten times the private equity fund market; the largest firms are mostly public.
- US listings peaked in 1997 and then more than halved, owing to M&A, costlier regulation and abundant private equity capital.
- Public: liquid shares, observable prices, transparency, standardised disclosure, owner–manager separation, mostly mature firms. Private: illiquid, negotiated trades, sale restrictions, concentrated ownership and control, limited disclosure, owner–manager overlap.
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