Going public

Updated: 2006-09-27 14:07

Process by which shares of common stock are first offered for sale in the public markets (through the organized exchanges or over-the-counter); also called an initial public offering.

The advantages of going public must be weighed against the disadvantages. Going public may give the company and major stockholders greater access to funds, as well as additional prestige and wealth.

It also means that shares assume a market value - a value placed on expected future earnings. On the other hand, the company must open its books to the public through stock exchanges and state filings and put up with pressure for short-term performance by security analysts and large institutional investors.

Going public means altering the organization of a corporation from ownership and control by a small group of people, as in a close corporation, to ownership by the general public, as in a publicly held corporation.

When a corporation goes public, it opens up the sale of shares of its stock to the public at large.

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