As I understand it, the only reason a private company would float on the stockmarket would be if they needed to raise a large amount of money for Something (it has to be specific, right?).
Is there any benefit to a company that’s already got plenty of money, floating? Let’s make a few assumptions:
[ul]
[li]They are not planning to do anything illegal[/li][li]They are not doing it solely for a tax write off (I assume there are beneficial tax implications to floating?)[/li][li]They are not planning anything new and expensive[/li][/ul]
The owners may just want to sell all/part of the company. When you bring your company public you are selling off your company, but instead of having to find one big buyer, you can find many people willing to take a smaller interest.
The main reason is that so the initial investors could get any part of their investment out at any time they want quickly. Let’s say that I own 20% of a private company. If I want to sell of 5% of my shares (1% of the company), this may not be easy if it is private. First, private companies usually don’t publicly reveal full financial statements. Thus a potential buyer may be leery about what he is purchasing. Second, if the company is public than the market has already set a value as to what a share is worth. Without an established market value, the buyer would have to estimate himself what a 1% stake is worth. Last, if the company is publicly traded, shares are very liquid. Someone who buys shares from me can quickly get his money out buy just calling his stockbroker.