How does a private company go public? What is the process and requirements? Is there a set amount of profit that a company has to make before going public?
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Fun fact – you can the paperwork and buy a shell company that already was approved by the SEC and just fold your private company into that.
More on point to your question: Generally as a company is growing, the founders are getting investment money. Each time they get an investment they all need to agree how much the company is worth. For example, if the founders of ABC Tech Inc received an investment of 1 million dollars for 10% of the company, then that means ABC Tech Inc is currently “valued” at 10 million dollars. Put another way, a 10% stake of a 10 million dollar company would cost 1 million dollars so it works when you calculate it backward. Generally when a stock goes “public” and now ANYONE can invest by purchasing a share, the company decides the amount of stock to release (this can be in the millions) and based on the amount, the initial public offering (IPO) is simply the latest value divided by the amount of shares released. It’s a little more nuanced than that, but that is basically how it works.
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