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Questions and Answers
What is the most common way for a private company to become public?
What is the most common way for a private company to become public?
- Selling shares to investors
- Meeting all regulatory requirements (correct)
- Acquiring other companies
- Issuing bonds
What is the purpose of a public company?
What is the purpose of a public company?
- To raise capital (correct)
- To create jobs
- To increase profits
- To provide services
How much of the company pie do you own if you buy 2 shares for $100 each?
How much of the company pie do you own if you buy 2 shares for $100 each?
- 0.2%
- 0.02%
- 0.002%
- 0.0002% (correct)
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Study Notes
- To invest in stocks, you will need to set up your own brokerage account.
- After the IPO, share prices are affected by supply and demand as the shares are bought and sold on the open market.
- Shares of the company may be bought and sold in the stock market.
- A public company is a corporation owned by shareholders.
- Most public corporations were once private companies that, after meeting all regulatory requirements, opted to become public so they could sell shares to raise money (or “capital”).
- After the IPO, the shares are bought and sold on the open market.
- For example, a company whose value is $100 million may want to issue, or sell, 1 million shares at $100 per share or they may want to issue 20 million shares at $5 a share.
- Whether you buy 2 shares for $100 each or 40 shares for $5 each, you have paid $200.
- Since the company’s market capitalization is $100,000,000, either way, you own a .0002% slice of the company pie.
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