Legal Definitions - public company

A public company (also known as a public corporation) is a business entity that has offered its shares of ownership to the general public through a stock exchange. This means that anyone can buy or sell portions of the company's ownership, known as stock, on the open market. Because their shares are publicly traded, these companies are subject to strict regulatory requirements, such as regular financial reporting and disclosure rules, designed to protect investors and ensure transparency. This contrasts with a private company, whose shares are not available for purchase by the general public.

• Example: A major technology company, known for its smartphones and software, lists its shares on the NASDAQ stock exchange. Millions of individual investors and investment funds own small portions of this company by purchasing its stock.

  Explanation: This company is a public company because its ownership (shares) is available for purchase by the general public on a recognized stock exchange. It must comply with regulations set by bodies like the Securities and Exchange Commission (SEC) regarding its financial disclosures and operations, ensuring transparency for its many shareholders.

• Example: A well-known grocery store chain with hundreds of locations across the country needs significant capital to expand its operations and modernize its stores. To raise this capital, it decides to "go public," offering shares of its company to investors on the New York Stock Exchange (NYSE).

  Explanation: By offering its shares on the NYSE, the grocery chain becomes a public company. This allows it to raise large amounts of money from a wide range of investors, who then become partial owners. In return, the company must regularly publish its financial performance and other material information, making it accountable to its public shareholders.

• Example: A company specializing in developing and operating large-scale solar farms requires substantial investment to fund new projects and maintain existing infrastructure. To secure this funding, it issues shares that are traded on a major stock exchange, allowing institutional investors and individuals to invest in its growth.

  Explanation: This renewable energy provider is a public company because its shares are bought and sold by the general public on a stock exchange. This public access to capital enables the company to finance its capital-intensive projects, while also subjecting it to public scrutiny and regulatory oversight regarding its financial health and operational transparency.