Understanding the Financing of Publicly Traded Companies

The CEO of Black Ice Advisors, LLC, Brent Fouch manages an investment fund in San Diego, California. Among his professional responsibilities, Brent Fouch completes due diligence and invests capital in qualifying publicly traded companies.

A publicly traded company is a business that issues stocks that are traded either on the over-the-counter market or on a stock exchange. Additionally, a publicly traded company is owned by both institutional and individual shareholders who control the company's decisions. When a company "goes public," it holds an initial public offering (IPO) to attract shareholders and the company is sold in part or in its entirety to the public.

In comparison to privately held companies, publicly traded companies typically experience greater ease in securing financing because they can sell more of their stock to the public. Privately held companies, on the other hand, must acquire private funding. Publicly traded companies, in turn, experience more regulation. For example, for a company to sell its stock on the U.S. stock exchange, it must submit quarterly earnings reports to the Securities and Exchange Commission (SEC). Also, a publicly traded company generally accepts greater regulatory oversight in order to facilitate raising capital for projects and expansions.