Whether to go public or remain private is a fundamental question for big business. Here's what companies consider when making that clutch decision:

• Public companies can tap financial markets to raise capital for expansion. A public company can sell stock (equity) or bonds (debt). Typically, the cost of raising money for a public company is less than for a private company.
  
  
• Private companies aren’t required to disclose their financial information to the SEC. However, if they’re trying to raise money for expansion, potential investors will review the books. A private company’s inability to tap public capital markets forces it to turn to private sources. This may drive up the cost of expansion or even limit future plans.
  
• Public companies can offer stock options to attract and hold top management and key personnel, but this tactic has been tarnished by alleged back-dating problems involving top companies such as Apple (AAPL), Foundry Networks (FDRY), Intuit (INTU), VeriSign (VRSN) and Marvell Technology (MRVL). Most private firms don’t have the ability to offer significant non-cash compensation to key employees - which may force them to offer more cash up front.
  

  • STOCKS
  • RELATED ARTICLES
  • ALSO BY...

  SEARCH:

  
  
• Investors in public companies can buy or sell stock quickly and easily through a broker at Merrill Lynch (MER), Morgan Stanley (MS) Goldman Sachs (GS) or T. Rowe Price (TROW) and online through TD Ameritrade (AMTD). But stock in a privately held company is held by a limited number of people. It may be difficult to determine a fair price and sell it quickly. This could result in a significant drop in value.
  
  
• It’s difficult to compare the values of public and private companies. In general, private companies seek to limit tax burdens while public companies seek to increase shareholder value. The multiple of a public company is calculated on net income after taxes, but the multiple for a private company is calculated on pre-tax and sometimes pre-debt income.