My almost non-existent understanding of having a company go public means that a company starts selling shares to the general public.
Suppose I am a rich nutcase, owner of a private company, and decide to have my company go public, but I want to have all the shares belong to me. Can I have an IPO with just one share, or two shares, one for me, one for my wife, and buy them up as soon as they are available? Or maybe set the price for them to be so high that no one would buy the shares except me (and if they do, then I would have made a huge profit anyway.)
If you want all the shares to stay with you (and your wife), then you simply don’t go public. The reason for going public is to raise additional money for the company from the public. What you are suggesting would not accomplish this.
When you go public, you can set the price wherever you want, but the public doesn’t have to buy and again you don’t raise any money. When a company goes public, it hires an underwriter to sell the shares to the public. With a fixed price offering, the underwriter guarantees to sell them at that price, but in the case you outline, no underwriter would agree to handle the IPO. They might offer to do a “best efforts” offer, but in that type of offer you only get whatever money the pubic is willing to pay.
I figured it probably wouldn’t make sense, which is why I said “rich nutcase” in my OP, I was just wondering if it was theoretically possible.
e.g. My company is worth one million dollars, and it would be a “public” company with one outstanding share that is worth a million dollars.
I should add, that if you want your company to be listed on the NYSE, they have rules about number of shares and diversity of ownership (# of owners not ethnicity).
There are many ways to go public but still keep control. All you need to do is structure things so that you have 50.1% of the outstanding shares. And you aren’t required to make all the shares in the IPO available to the general public – you can reserve some for yourself.
For instance, IDT Corporation’s IPO in 1995 only sold 20% of the IPO to the general public; the rest went to the owner.
Another method is to have different classes of shares. Issue Class A stock to yourself, where each share is worth 1000 votes, then issue Class B stock, with each share being a single vote, to the public. Thus, you can issue yourself 10,000 Class A shares, and 8 million Class B shares to everyone else. Even if one person bought all eight million shares, you’d still maintain control.
You can’t have all the shares, but you can easily have enough to have complete control of the company.
Securities lawyer here. Usually companies go public because they want to sell shares in order to raise money for expansion, or because the owners want to sell some of their holdings. A secondary consideration may be to create an active trading market for their shares, which makes the shares more valuable as a way to compensate employees and allows an exit strategy for the owners since they can sell into the market.
However, it is also possible to do what you want: To go public without selling any shares at all. This would be done through the creation and sale of a new class of securities other than common stock. Presumably this is also done to raise money. The company can sell, say, bonds or preferred stock in a public offering, and there is no dilution of the owners’ common equity.
But the original scenario posted is meaningless: If no one other than you owns the stock, the company has not gone public.
Why would someone that owns all of the shares of a particular company want to have their company listed on a stock exchange?
Being listed (public company) comes with numerous legal compliance requirements that most people don’t want to put up with if they don’t have to. Owning a public company vs. a private one doesn’t make you “rich”. The company has a market value whether it’s public or private.
Many corporations have done exactly that. (The company I’m most familiar with used the class names in the other order.) The effect is that most of the OWNERSHIP shares are sold publicly, but the majority (or sufficiency, if appropriate) of the CONTROL shares remain closely held.
Another example: Berkshire Hathaway. One share of Berkshire Class A (BRK.A if I remember correctly) has effectively 200 votes to each share of Berkshire Class B (BRK.B). However, BRK.B went public (IIRC#2) at 1/30th of the BRK.A price, not 1/200th. So buying BRK.B costs more per vote than buying BRK.A. The catch is, BRK.A is presently (checking…done) $120,934, and BRK.B is $80.62. (It would seem Class B split since its IPO.) Very few investors will pay 6 figures for a share of stock. BRK.B makes the stock more liquid, with less dilution of control.
If memory serves, Ford is a public company where control resides exclusively with the Ford family. The publicly-traded shares have little or no voting power, and the class of shares that does have voting power is held by the Fords.
This is sort of correct although overstated. The Ford family, which is something like 90 people, own all of the company’s Class B stock. This class of stock has a combined 40% of the voting rights of Ford. This is clearly a high enough percentage to say that they have a controlling influence over the company. The Ford family in actuality only owns about 2% of Ford though. The publicly owned stock therefore has 60% of the voting rights and constitutes 98% of the ownership of the company.