Why the heck are companies listed publicly?
In our previous article, we talked about the benefits of owning stocks. Now, let’s talk about why a company such as winfit would want to offer its shares to the public:
Publicly Traded Company:
A company whose ownership is dispersed among the public in many shares of stock which are traded on a stock exchange.
There are three main benefits. Firstly, the company is able to raise large amounts of capital through the sale of shares. Going public is an alternative to borrowing from a bank (e.g. loans) and issuing debt (e.g. bonds).
Secondly, more people might become aware of winfit due to media attention. The company might gain popularity and increase it’s sales.
Thirdly, winfit is able to share its risks. If winfit sells half of their shares to the public, winfit needs to pay for only half of their debts. The other half of the debt is transmitted to the shareholders.
This risk is one reason why holding stocks is a risky investment for Anna. On the upside, she might gain money when the winfits profits increase. On the downside, she might lose her money when winfit goes bankrupt.
And that’s exactly why Warren Buffet – the famous investor and multi-billionaire – says “only invest in a business you understand”. If you believe a company has a promising future, then there is a good chance you can profit from this company by investing in their stocks.
Are you curious to see how your favourite company is performing?
Tip: Type into google companyname stocks (e.g. nike stocks) to see the performance of company’s stock.
In which business or industry are you interested in? Let us know in the comments below!