Does your company still need to be listed?
In a Public-to-Private (PtoP) operation, a listed company decides to remove its shares from the stock exchange:
- By reducing capital to the benefit of the minority shareholders;
- Through a takeover offer by the majority shareholders or a new shareholder. The latter is frequently a private equity fund planning an LBO.
A company is considered to be ‘public’ when it has more than 50 shareholders. It is said to be ‘listed’, by contrast, when its shares are officially quoted and traded on a stock exchange.
When a company is private or relatively closely held, many aspects of corporate governance and communication are conducted informally, allowing greater flexibility in its management.
Conversely, listing on a registered stock market entails a series of expenses, such as financial communication and disclosure requirements, securities filings, analyst sessions, corporate governance requirements, and so on.
Companies with good cash flows, but unfairly low market caps, go private as a way of delivering value to minority shareholders (who are cashed out), and to the majority shareholder staying in, who reaps the benefit of the strong cash flows.
Companies that have gone private no longer have access to capital-market funding and receive considerably less brand recognition than publicly held companies.