Unquoted Public Company
Contents
Unveiling Unquoted Public Companies: Characteristics, Reasons, and Implications
What Is an Unquoted Public Company?
An unquoted public company, also known as an unlisted public company, is a firm that has previously issued equity shares but is no longer traded on a stock exchange.
Understanding Unquoted Public Companies
Public companies typically issue shares through an initial public offering (IPO) and trade on recognized stock exchanges or over-the-counter (OTC) markets. Unquoted public companies, however, are not listed on exchanges and trade OTC. These companies may choose to remain unquoted for various reasons, such as not meeting listing requirements, preferring fewer shareholders, or avoiding disclosure requirements.
Reasons for an Unquoted Public Company
Companies may be unquoted due to size constraints, insufficient shareholder count, or delisting from major exchanges. By remaining unquoted, companies can operate with less regulatory oversight compared to listed counterparts, although they still need to comply with financial reporting requirements and may face takeover regulations.
Trading and Valuation
Shares of unquoted public companies trade OTC, which often lacks transparency compared to public exchanges. Additionally, these shares may be illiquid, making pricing challenging. Valuation methods include the comparables approach, analyzing similar companies or industry competitors to estimate equity share value.
Example of an Unquoted Public Company
Imagine Google executives deciding to delist the company's stock and become unquoted. Trading would shift to OTC markets, making transactions less accessible. Valuing the stock would be challenging without readily available financial information, relying instead on analysis of proxy companies. However, Google would benefit from reduced regulatory burdens.
Key Takeaways
- Unquoted public companies are firms that have issued equity shares but are no longer traded on stock exchanges.
- Reasons for being unquoted include size limitations, shareholder count, or delisting.
- Trading occurs in OTC markets with less transparency, and valuation is often based on analysis of comparable companies.