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I know that an IPO means that a particular company, regardless of the country, is offering some quantity of their stocks to the public via the stock exchange. I also assume (but not sure) that if they are offering 100% of stocks to the public, then they want to be a private company.

When a company decides to do an IPO, does that mean they are already a public company or does it mean they are becoming (or want to become) a public company? Can a company that does an IPO already be public before the IPO is finalized (or has even started)?

(The reason for my question is the following: I'm doing my best to find up-to-date free-of-charge reports about worldwide public companies doing an IPO, but unfortunately everything I find concerns private companies only.)

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  • The company could be government owned, which is again owned by the people of the nation. However the government decide to List it for public purchase. Eg: FEMA in US, Many asian countries do it. BSNL, NHAI, NTPC in india, Some Russian companies, Bank of china in China. Mining companies. – user100018 Jul 13 '20 at 7:49
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    Initial means 'first'. – J... Jul 13 '20 at 13:56
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I know IPO means that particular company, regardless of the country, is offering some quantity of their stocks to the public via stock exchange.

An IPO is an initial Public offering. They are taking a private company public. This is the first time that they are making shares available through a "stock market".

I also assume (but not sure) that in case if they are offering 100% of stocks to the public then they want to be private company.

This is backwards. If they had no shares on any market then they would be a private company. In the case of a private company they have only a handful to a few hundred people that own shares. The founders could have awarded shares to employees. They could have traded shares to early investors. But because the shares can't be bought and sold on a market the company is private. When an employee that was awarded shares leaves the company they can only sell their shares to the company or sometimes to another employee.

However, what I don't know and what my question is, is the following: When company decides to do IPO, does that mean they are already a public company OR does it mean they are becoming (or want to become) public company?

If they are doing an IPO they are not a public company already. They will, after the shares hit the market, be a public company.

Basically I'm asking if company that does IPO can already be public one before IPO is finalized (or even started). The reason for my question is the following: I'm doing my best to find up to date free of charge reports about worldwide public companies doing IPO but unfortunately everything I find are private companies only.

Only private companies can do an IPO. They decide how much of the company to make available.

Now sometimes a public company can offer another large chunk of shares when they want to get cash to fund an expansion, or an acquisition, or pay off dept. If the company is selling the shares and getting the money it is a Follow-on offering

Sometimes a big investor that owns a chunk of shares want to sell their shares. They will not dilute the investors when they sell the shares. The money goes to the exiting investor. That is a Secondary market offering. Sometime it is also done when longtime employees want to sell some of their shares that have grown significantly when the company was private.

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It's all in the name: Initial Public Offering (IPO). Before that, it's a private company. If an already public company issues more stock, it's called a secondary offering.

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    It is not Secondary Offering, it is Follow-on Public Offering (FPO). – base64 Jul 12 '20 at 11:42
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    @base64 isn't that the same thing? investopedia.com/terms/s/secondaryoffering.asp – 0xFEE1DEAD Jul 12 '20 at 11:46
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    It's a common misconception (which is also perpetuated by the media) but being private/public is a totally separate concept to being listed/unlisted (albeit it's typically a requirement to be public before an exchange will allow you to list). Thus the statement "Before that, it's a private company" is actually incorrect. In fact there are far more unlisted public companies in existence than listed ones, due to the fact that the regulatory requirements to be listed are far more onerous and costly than those for being public. – JBentley Jul 14 '20 at 15:57
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Since you didn't specify a country, I'll answer on the basis of the UK, given that it is a major financial center. Just bear in mind that exact definitions may vary in other jurisdictions.

It is a common misconception that "public company" has the same meaning as "listed company". Actually the term "public company" does not mean what you think it does. Under section 4 of the Companies Act 2006, a company can be either a private company or a public company. Being a public company is simply a matter of how your company is registered, and does not imply that your shares are listed on an exchange. That is an entirely separate procedure, governed by separate rules, and such a company is typically called a quoted company, traded company, or listed company (albeit technically the term listed only applies to the Main Market of the London Stock Exchange, but this distinction is not commonly made). You may also see the word public prepended so e.g. "public listed company". The important thing to bear in mind is that "public company" does not mean the company is listed. In fact there are far more unlisted PLCs (Public Limited Companies) than there are listed ones.

"I also assume (but not sure) that in case if they are offering 100% of stocks to the public then they want to be private company"

If a company has offered 100% of its shares to the public then it is very unlikely to be a private company (as defined in the Companies Act). This is because section 755 of the Companies Act 2006 prohibits private companies from making an "offer to the public any securities of the company".

When company decides to do IPO, does that mean they are already a public company OR does it mean they are becoming (or want to become) public company? I'm asking if company that does IPO can already be public one before IPO is finalized (or even started)

Yes, because of the prohibition on private companies offering shares to the public, an IPO cannot take place without the company being a public company. This means that they will either already have been a public company before listing, or will convert to a public company during the listing process.

If instead you meant to ask whether a company doing an IPO can already be a listed company, then the answer is no. IPO stands for Initial Public Offering. Thus the term only applies to the first time a company lists its shares. Subsequent offerings are known as secondary issues.

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An IPO has three significant aspects:

  1. It is initial. An IPO is performed by a private company that has promised to become a public company. Buyers agree to purchase the shares and hand over money to escrow in the weeks before the company is listed on the stock exchange. The company is obtaining the approvals for stock exchange listing, if the company does not list on the stock exchange then the share sale is void and the money in escrow is returned to the buyers.

  2. It is underwritten. The underwriter will purchase the shares if no other buyer is found. The underwriter usually acts as a sales agent promoting the shares to potential buyers.

  3. The shares offered to the public are newly created shares. Shares in the private company may handled in two ways: they may be exchanged for shares listed on the stock exchange, or they may continue to be held by the existing owners in a multi-class share structure.

As others have answered there are several types of public offering, combining the following:

  1. Shares offered by a public company | Shares offered by a private company that has approval to go public | Shares offered by a company that is public in another jurisdiction or on another stock exchange.

  2. Shares may be underwritten | Shares may be directly offered.

  3. Shares for sale are new shares | Shares for sale are existing shares.

  4. The sale is raising money for the company | The sale is realizing profit for existing share holders | The sale is meeting legal obligations (minimum number of shareholders, etc).

Also note that a private company may have a presence on a stock exchange through a sale of publicly traded bonds.

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    +1 for an overall good answer, but number 3 (the first one) is not necessarily true. The shares offered to the public can be existing ones. In fact this is a very common business model for venture capitalists: take out a stake in the startup and then realise the investment when it IPOs. – JBentley Jul 14 '20 at 15:47
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An IPO is an initial public offering. The company becomes public when they do the IPO - they are a private company beforehand.

It's the first time a company is raising money from the public. The public can basically be anyone over the age of 18, at least in the United States, who has the ability to open up a brokerage account. It's a very broad term since it encapsulates so many people/companies/institutions.

Before an IPO, a company only has access to capital from very select companies and individuals - these are typically, but not limited to, private equity firms and/or accredited investors.

One important note is that this does not mean a company gives away 100% of it's equity (stock) to the public in an initial public offering. Typically, it's only a percentage.

If the company gave away 100% of its equity, there wouldn't be anything left over for management to own, which would basically render the company worthless since there needs to be an incentive for management to A) manage/work for the company and B) take risks with the human and financial capital it has at its disposal. Because of this, there's typically a concentration of a handsome percentage of the company's overall equity that is owned by "insiders" - management, founders, etc.

You're able to see who owns what percent of a company on platforms/websites like Bloomberg Terminal or Yahoo Finance. As an example, Jeff Bezos owns roughly 12.5-15% of Amazon's holding company, Amazon, Inc., (not sure on the exact amount) which is traded on a public exchange called the NASDAQ (AMZN is Amazon's ticker - a ticker is basically a key that's used to look up a company on a particular exchange. If you use Google, you can quickly get stock quotes by searching "NYSE: ABC" or "NASDAQ: ABC" where ABC is whatever ticker you wish to look up)

In the example above, Mr Bezos along with the other owners of the company (when it was private) have given away, over time, roughly 85% of the company's equity (stock) for the general public to potentially own.

I hope this answer is helpful.

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  • Note that your use of the word "public" in this answer is the commonly perceived one (e.g. used by the media), but not technically correct. A public company can be listed or it can be unlisted. See for example en.wikipedia.org/wiki/Unlisted_public_company or my answer which addresses the UK situation specifically. It is entirely possible and indeed common for a company to be already public before it even thinks of doing an IPO. – JBentley Jul 14 '20 at 15:41
  • Also whilst it is common for management to have some stake in the business, it is very inaccurate to say that a 100% publicly owned company would "render the company worthless" or that there would be no incentive for management to work for the company. The company is worth the net present value of its future revenue streams regardless of whether management own shares. Management are incentivized by their salary (and possibly performance related bonuses) plus the ultimate sanction that the shareholders can impose by replacing the board. – JBentley Jul 14 '20 at 15:44
  • This answer is incorrect, here is a better explanation: money.stackexchange.com/a/127763/99703 – Simson Jul 15 '20 at 2:21
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This is a answer from Brazian regulation perspective, but I think this applies everywhere.

A public company can be unlisted, but a listed company must be a public company

A public company is a company where they have public data. A public company may or may not be listed.

A listed company is a company who emtis or issues a security, in a public exchange. A listed company must be a public company.

For ou specific question: an IPO is a process where a company go to public in listing and public in data. But a company can turn public without an IPO.

The intersection of public and listed companies are so encompassing that the two are almost synonymous, and so the confusion.

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The core of this question is the word public, which is a term in company law, but also means being traded publicly.

In this case public company have two different meanings, in company law there are in some jurisdictions a dissection between a public and a private non-public limited company. A public company is governed by a slightly different rules set, for instance to be allowed to have over a specific number of owners (share holders) a company needs to be public. The requirements of stock capital is also higher on a public company.

If the legal entity of the company is setup as publ, its owners can decide to make an IPO, an initial public offer. This is usually done when public trading on a stock exchange begins. The IPO does not as such change the legal status of the company only how it is traded. The IPO can be a way to raise money for the company with a rights issue or one of its presents owners selling a share of the company in bulk before public trading starts at the market place.

So the answer is yes to be able to make an IPO the company must be public, but since the legal requirements for a public company also includes a higher requirement for stock capital it make sense to issue new stocks in an IPO and change the legal status of the company at the same time.

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  • One up and one down vote, a comment about why you voted it down so any problems could have been addressed would have been appreciated – Simson Jul 13 '20 at 4:20
  • -1 because this answer adds to the confusion by introducing legalese and ambiguous definitions of "public". The last sentence is clearly the wrong conclusion in the "public" sense of IPO. – 0xFEE1DEAD Jul 13 '20 at 15:40
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    @0xFEE1DEAD In the UK the last sentence would be correct. A company must be a public company before it can do an IPO. I believe this is generally the case in most other jurisdictions, but cannot say with certainty. I agree that many people misuse the word "public" and think it means listed, but that's no reason to avoid tackling the misconception. – JBentley Jul 14 '20 at 15:52
  • My answer could be improved by some editing but this money.stackexchange.com/a/127763/99703 explains it even better. – Simson Jul 15 '20 at 2:08

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