Posted in Finance, Accounting and Economics Terms, Total Reads: 147
Definition: Going Private
Going Private takes place when a publicly listed company decides to go private. It means that the company’s shares aren’t for sale to the customers and the company doesn’t have to file public financial statements. The company is no longer listed on the stock exchange.
There can be various reasons for a company to go private. One of the reasons can be that the shares aren’t widely traded and don’t meet the requirements required to get listed in a stock exchange. Another can be that the company’s shares are no longer widely held. The company may also go private with the aim of restructuring so that they can again go public in future. The company may be struggling to save its existence and it can go public to save the expenditures and regulations associated with it.
A company can go private in many ways. The management can buyout all of its publicly traded shares from the market and become private or another company gives an offer to buy most or all of its shares from the market. Private equity firms buy the stocks of a struggling company, restructure it and offer again the shares in the market for getting it public. Going private involves a huge amount of debt.
For a company to go private, significant amount of additional costs can be incurred due to which the company may have to take debts. Going private provides huge leverage to the company.