Question

Using a corporation of your choice, explain the following; is the corporation a publicly traded company? What does it mean to be publicly traded and explain the process a company would need to undertake if the owners decided to go public?

Answer 1

Apple is a publicly traded company. A publicly traded company is a corporation whose shares are actively traded in the stock market of any country. For example, the shares of apple are traded in NASDAQ. A company's share can be traded in more than one stock exchange. For a company to go public it has to apply for listing in a stock exchange and issue shares in an initial public offering through an investment bank. The process of listing a company and issuing shares to the public via IPO is called underwriting and the investment bankers involve in this process are called underwriters. The investment bank buys the share of the company and then sell it to the public. Generally, the price asked for each share by the underwriter is less than the intrinsic value of the share. Underwriters deliberately do this to sell all the shares. When the demand for shares is more than supply then share are oversubscribed and the individuals opted for the shares gets less number of shares then what they have demanded. The allocation is generally on a proportionate basis but not always. If demand is less than supply then shares are undersubscribed and everyone gets the shares they demanded.