Eli5: How does a private owned company benefit itself financially by going public?
In: Economics
Imagine you have a lemonade stand with your friends. You make really good lemonade, but you want to make even more and sell it to more people. So, you decide to let other people invest in your lemonade stand by giving them little pieces of it called shares. When people buy these shares, you get money that you can use to buy more lemons, cups, and maybe even a bigger stand!
When your lemonade stand becomes really popular, your friends who helped you make it might want to sell some of their shares to get money for themselves. Now, because your stand is so famous, more and more people want to buy shares in it, which makes the price of your shares go up!
Being a big, famous lemonade stand also means other companies might want to team up with you or even buy your stand. If you have shares that anyone can buy, you can use them to do these cool things, like joining forces with other lemonade stands or buying more stuff to make your lemonade even better.
And because your lemonade stand is doing so well and lots of people are buying your lemonade, everyone knows how much your stand is worth. This makes your stand look really good to other people who might want to invest in it or work there. So, going public means your lemonade stand can grow even bigger and become even more famous!
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