Doesn’t the inability to trade the shares on a stock exchange alone diminish their value?
In: 1
A common misconception is that companies somehow “make” money from stock prices increasing. Most companies don’t really sell stock outside of that first offering of stock (called an IPO). It’s like if I sell you a book and you resell it; I only make money off of my sale to you.
Now, that’s not to say that publicly traded shares have no value to a company. They can often serve as collateral for loans. But this is a secondary thing.
When a company goes private, the more important change is in reporting. Publicly traded companies have to publish financial data about themselves every quarter. They are also controlled by shareholders and many other regulations that don’t apply to private companies.
Latest Answers