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advantages of a public limited company
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Over the number of years, many private companies go public and it is becoming the trend. More and more companies are being listed in the stock markets. Every year, the new initial public offerings (IPOs) can be found in Bursa Malaysia and in the other countries’ markets around the world, such as NYSE. Recently, OldTown Berhad became a public listed company and trades its shares on the main board of Bursa Malaysia in 13 July 2011(Bursa Malaysia, 2011). It was founded in year 1999 as a private limited company and is the operator of “OLDTOWN WHITE COFFEE” chain outlets. The conversion of OldTown Berhad becomes a public listed company because they want to raise fund from the public to expand the business. Same thing happened to the other companies like Gas Malaysia and Peterlabs Holdings Berhad (Bursa Malaysia, 2011). Other than going public, there are several types of method to get the fund such as loan from banks, issue bonds and debentures. Therefore, there are reasons for the companies to go public. There is a say, “no pain, no gain”, is suitable to describe the companies in evaluating the advantages and disadvantages of going public with the other methods because they are indispensible.
The advantages of listing as public company has numerous benefits, the most significant one is opening wider and more comprehensive channel to raise fund. The fund could be raised by investing activities by individual stockholder or institutional investors. (New Straits Times, Business Times, 2010). The OldTown Berhad IPO was total RM79.2 million for the Group, RM38.1 million of it would be allocated for capital expenditure, that incorporated new factory building, machinery, facilities and capital for opening new café outlets, while RM19.7 mil...
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...lic and private firms. Retrieved at 11 October 2011 from http://www.edegan.com/pdfs/Mortal%20Reisel%20(2009)%20-%20The%20Real%20Benefits%20Of%20Being%20Public%20Evidence%20From%20Public%20And%20Private%20Firms.pdf
Ramirez, S. (n.d.). Major Acts of Congress. Retrieved October 7, 2011, from eNotes: http://www.enotes.com
The New Straits Times Press (Malaysia), (2010) Benefits and risks of going public, Business Times, Retrieved at 11 October 2011 from http://www.btimes.com.my/Current_News/BTIMES/articles/wkn05/wkn05.pdf
U.S. Securities and Exchange Commission(SEC), S. a. (2010, January 29). The Laws That Govern the Securities Industry. Retrieved October 7, 2011, from U.S. Securities and Exchange Commission: http://www.sec.gov
Wreford, T. (n.d.). Stock Trading- Advantages and Disadvantages. Retrieved October 7, 2011, from Zeromillion.com: http://www.zeromillion.com
Grand Metropolitan PLC is the world’s largest wine and spirits seller. It mainly operated in London, USA. In 1991, it beats market expectation with a 4.8% increase in pretax profits, and the company Chairman stated that company’s goal “to constantly improve on”. Despite the great performance in the world recession in 1991, the price of GrandMet shares was 10% below the average price/earnings ratio of the companies in the Standard & Poor’s 500 index. And more important, rumors had that GrandMet, valued at more than $14 billion in the stock market, maybe a takeover target. The management dilemma is to understand why the company’s stock is traded below of what considered being the right price and whether the company is truly being undervalued by the market or there are consistent issues with negative NPV projects and lines of businesses.
A Guide to the Sarbanes-Oxley Act of 2002 (2006). Retrieved December 16, 2009 from www.soxlaw.com
Capital access threats: Since it is a closely held company financial information is limited and if the company is not doing well it may find it difficult to access funding from financial institutions.
The securities Act of 1933 has basic objectives, to require investors to receive financial and o...
The process of doing this cased the company to ask for help from other competitors about the exact price to offer in the market. Investors knew that the price might be among 22 to 24 per share. However, the JetBlue noticed that the IPO demand is anticipated to be more than 5.5 million. Thus, the management requested to increase its price to 25-26, this would make the management concerned to convince the shareholders that the higher price improve the company in the market. Furthermore, the company was scared if this strategy would hurt sales in future. They should decide if the higher price would improve company technique in stock
Today, it is generally perceived by the public that the single and sole objective of corporations is to maximize profits (Bartlett, 2015), reflected in President Bill Clinton’s radio address in 1996 during which he stated “the most fundamental responsibility for any business is to make a profit”. This belief could be substantiated by the statistic that the profit margins of American corporations have risen from the 1980s to 2008 (Blodget, 2012), shown by the increase in nominal GDP of the United States over the period (Yardeni, Johnson, 2016). Given the above, it could be deduced that most businesses do indeed have a single objective of profit maximization and therefore tend to pursue short-term gains at the expense of all other considerations.
Is The Tyranny Of Shareholder Value Finally Ending? N.p., n.d. Web. The Web.
Brealey, Richard A., and Myers, Stewart C. Principles of Corporate Finance. Sixth ed. McGraw Hill, New York, © 2000.
Initial Public Offerings (IPOs) are common ways for small companies to grow and expand by increasing their availability of capital. The Initial Public Offering started seeing a strong increase in popularity in the late 1990's. As a result of the growing popularity resulting in the dot com explosion, the term "IPO" became a household name. In order to understand how IPOs work, its best to first know how IPOs are created.
The Body Shop International case is an interesting case study into the miscommunication of owners and stockholder interests with regard to financial conditions. Anita Roddick, the founder of The Body Shop had no financial experience and thought that all she needed to do was expand her business and the financing would take shape as she developed her business. While Anita’s product concept of a natural skin-care line was good; her lack of experience in financial matters took its toll on her business.
A Sole Trader is a business that is owned by only 1 person. They are
This is a publicly traded company in the US that has been ding quite well in the recent years. The company’s 10k filing for the year 2014. From this statement, the risks facing the company will be identified classified and suggestions made on how best to mitigate them in the subsequent areas. There are various areas that the risks can arise based on the company’s 10k filling (Mertz, 1999).
Using equity as a source of finance would mean that Barra Airways would be increasing the level of shareholder accountability it currently has. In the future, Barra Airways may find that in the future its freedom to make conduct business freely is hindered, if it issues more equity. The legal action taken by shareholders against companies has risen substantially since 1996 [7]. If this trend continues into the future then the likelihood of Barra Airways experiencing shareholder activism is significant.
Securities Commision Malaysia. (2014). General Article: Corporate Governance. Retrieved March 26, 2014, from Securities Commision Malaysia: http://www.sc.com.my/corporate-governance/
When entrepreneurs plan their business future they will consider how they can increase their business size or profit in a short period. Entrepreneurs may consider growing their business or company by using a merger or an acquisition. These methods can be a speed up tool and a short cut to enlarge their business. (Burns, 2011) Also they can reduce competition, make it easier for entrepreneurs to think about the market and product development and risk reduction. Furthermore, some lesser – known companies can improve their firm’s image and market power by using merger and acquisition with larger firms. However, there may be risks associated with merger and acquisition related to lack of finance and time. (Burns, 2011) This essay will discuss more deeply the advantages and disadvantages of using mergers and acquisitions, showing how it can affect firms and market with the case study.