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In: Finance

Explain the decision to go private.

Explain the decision to go private.

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Expert Solution

The decision to go private is taken by many publicly listed company and it will mean that they will be buying back the shares from the secondary market and they will be trying to to regain the control of all the institution back in their hand and they will mostly providing a higher price for buying back the security than it is currently listed in the market.

The decision to go private is primarily motivated by factors like gaining absolute control on the business and the company's management would not like flotation of the share in the market and they will be trying to also not face so many of the regulations and they will be trying to focus more on the business and not on the share prices and hence they will be trying to manage the value of the business through generation of higher profits rather than higher market capitalisation so decision to go private will be involving with buying back all the shares from the market at generally a premium so that most of the shareholders of selling their shares back to the company and company will be having a higher control.

It will also mean that the company is eliminating the equity capital and it would be meaning that the company will be having a lower amount of equity capital in its overall capital structure so decision to go private is mostly influenced by gaining the control back in the hands of the company by the management.

Recently Tesla had announced one year back that it will be going private at $420 and it has led to a lot of debate.

jeff jeffy answered 2 years ago
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