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Finance: What is the Difference Between a Private Company and a Public Company? 6 Views

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What is the difference between a private company and a public company? If you have ever tried to buy shares in Mars candy (makers of Snickers), accounting giant Price Waterhouse Coopers, or Dell Computer, you might have a problem. Why? All three of those companies are private. Private companies refers to the investment class of companies that are not or not yet public. Many of these are startup, development stage, or vertically integrated family companies that have chosen not to go public due to the complex reporting requirements imposed by the SEC. Some are former public companies, such as Dell, that were taken private in a buyout tender scenario. Many real estate partnerships also fall under the private company category. Public companies are listed on an exchange and are required to follow reporting guidelines as per the SEC.

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Transcript

00:00
finance a la shmoop - what's the difference between a private company and
00:06
a public company? one word- regulation. well private companies have virtually
00:12
none. that is they are only quote regulated unquote by the contracts that [chains fall off building]
00:18
are passed among the key parties. I agree to invest such and such amount of money
00:22
to buy this many shares- and outlining the contract here in runs what happens

00:27
to that money given various outcomes. well private companies are usually
00:30
funded and covered by the wealthy. and the government feels that the wealthy
00:34
can afford their own damn lawyers that they have enough education to know that
00:38
they need lawyers ,and while they're on their own. but in the case of public
00:42
companies things are different the government feels like it owes protection
00:46
to Jo Plummer sixpack who invests his hard-earned 3 grand a year in savings in
00:52
coca-cola stock. coke arguably the most public of public companies lives under [Coca Cola shares and price pictured on a website]
00:57
all kinds of rules. disclosures of operations disclosures of finances and
01:02
disclosures of governance and CEO compensation or bottling plant problems
01:07
in South Paulo or even that lawsuit over the carbonated swimming pool boondoggle
01:13
in Nairobi. why so much paperwork and disclosure bureaucracy? well the
01:17
government feels that if they require all these notices from coke then Joe
01:22
plumber 6-pack is somehow protected as if Joe ever read those coca-cola
01:28
document disclosure statements. yeah pretty much never. would Joe understand
01:33
them even if he did read them? well probably not so why bother with them? in [man sits behind tall stacks of paperwork]
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theory it's just meant to be an added layer of protection for stockholders
01:40
just in case Joe decides to take a shmoop financial literacy course someday and
01:46
becomes a Rain Man level genius with you know the digits. of course on the other
01:50
hand there are a lot of government people who need employees and coke pays
01:54
lots and lots of fees for all of that disclosing, so as usual you know follow
01:59
the money. [man walks down yellow brick road littered with money] oh yeah.
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