Question

why do companies such as lyft and uber go public and not private? when they go public why do they pick to be listed on that particular markey (physical market or OTC market? explain what those markets are and why you believe the compabg chose that certain market. then provide supporting arguments for the market not chosen and why the company should have chosen that market

Answer 1

Private company- A private company is the company whose shares are not available for public or in public domain, it has privately held ownership.

Going Public- Companies go public when they want to grow and expand their operations, when a private company wants to expand outside the country boundries or within the boudries with other branches, it needs funds, to fulfill the funding needs, it issues shares in the public domain and becomes a public company. Public company diversifiesits ownership as the person who holds the shares of the public company is the shareholder and part owner also. Uber went public on May 10, 2019.

Primary market and IPO- Initial public offer is the offer through which private company goes public for the very first time, it issues shares in the primary market to the general public, public apply for the IPO and shares are allotted on a pro-rata basis. After the allotment, company gets listed on the exchange and its share is available for trading in the secondary market.

Physical market or Over the counter (OTC)- OTC is a physical market directly between two parties with no supervision of exchange laws. OTC does not have any centralized exchange, it has the customized contracts. Securities are traded via broker-dealer network in OTC market. Companies that cannot meet listing requirements, trade on OTC. There are some well known companies which are listed on OTC.

Advantage of Exchange traded public companies- A stock exchange has good volume of buying and selling, it has greater transparency and liquidity. Risk is low in this market as there is intervention ofGovernment as well as Securities exchange commission (SEC). It is a regulated market.

Advantage of OTC- Tailor made financial products, hassle free, no regulation, collateral or initial margin not required, less listing formalities.