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What happens when a public company goes private?
When a public company goes private, the public company's shares are bought at a premium by the group of private investors that are purchasing the company.
A private company going public is more common, and this is achieved by conducting an initial public offering (IPO) for its shares or stocks.
However, the reverse of this is possible, but not as common. This is when a public company transitions to private ownership when a private purchaser acquires the majority of its shares. Shareholders must agree to this sale in order for this transaction to take place.
Companies that execute this transaction generally sell their shares at a premium over the current market value. This acts as compensation to the shareholders for giving up ownership in the company.
This public-to-private transaction results in the company's shares being removed from the public stock exchange. Shares are no longer available to the general public.
While companies may be privatized for many different reasons, this often occurs when a company is considerably undervalued in the public market.
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