What does it mean when a company “goes public”?
In: 10
Imagine you start a company to make widgets. You put in some of your own money to get started, and you own 100% of the company. The company is chugging along just fine…. you can make a few hundred widgets a month and sell them at a profit.
You decide you want to get bigger. In fact, to meet the pent-up demand for One_Tumbleweed’s widgets, you want to build a million-dollar widget-making factory. Where do you get that money? There’s a few options. You could take out a loan from a bank, for instance. You could try to find 10 friends each willing to invest $100,000 in your company.
Or, you can “go public.” You divide up the ownership of the company into 100,000 shares. You keep 50,000 of them (so you now own half the company), and you try to sell the remaining 50,000 for $20 each. Congrats, you’ve just raised your million bucks — you’ve simply traded half the ownership in the company to do so.
Latest Answers