Public versus Private -- Corporate choices

     There is almost always great excitement when a brand recognized company initiates an Initial Public Offering (IPO). We look at the public stock indices and it is sometimes difficult to remember that Google (Alphabet) was once a private company or Facebook or Amazon or ... It is possible that there exists a company that began as a public corporation but I am unaware of it.
     There are still a lot of companies that are privately owned. Occasionally, a public company will move back to private ownership (they do this by buying back all stock that has been publicly issued). This movement in both directions indicates that each has its pluses and minuses.
     I am not an economist or a lawyer and cannot tell you all of the ins and outs of what is applicable. There are two general sets of regulations. One set is applicable to both private and public corporations. This set is primarily concerned with safety, health, and wellbeing (financial, social, and others) of employees. OSHA (the Occupational Safety and Health Administration) oversees much of this in the U.S. There are also general accounting, environmental, and other laws which apply to all corporations.
     The other set of regulations cover the security of stockholders -- those people within the general population who have invested their money in the fortunes of the public corporation. Naturally, since there are no public owners (and are not available for "trading") of private corporate stock, these regulations do not apply to private corporations. This means that private companies have a lot more flexibility in how they use their internal money -- but, depending on size and other factors, may have to treat their employees similarly to that of a public corporation.
     What is the attraction of "going public"? As a former small company owner, I can only tell you my views. The first is "exit strategy" -- what do you have once you have left the company. Within a private company, whatever my share of ownership may be, my share has no formal valuation. (If it is the target of being acquired by another company then an informal, estimated, valuation will indeed be made.) I have 40% of Company ABC. If it is private then that is 40% of ??? If an offer is made to acquire the company for $10 million, then my 40% is effectively worth $4 million -- but only if someone pays that. In a similar fashion, an IPO will indicate -- selling X% of the company divided into Y initial shares priced at $Z -- how much my share of the company is worth (once again, assuming someone wants to buy it -- it is not a "liquid" asset).
     The second attraction is to bring in additional money (capital) into the corporation for future desires. I have a store that has an estimated (it is still private) value of $2 million based on $200,000 net yearly profits. I want to open a second store but I do not have enough actual money in the bank to do such. Loans for private corporations are largely based on personal assets of the primary owners -- so that may not be attractive. But, if I sell 49% (common to not have the initial offering be a majority of the ownership) of the store, in stock, to people for $1 million then I have money available to purchase/build a second store and, if the faith that the stockholders have placed in me is valid, I can hope to soon have two stores, each worth $2 million for $4 million total. And those wise and brave investors have stock now worth $2 million -- a 100% increase in their investment.
     An in-between of private and public is venture investment. They often will insist on getting a majority of the company (almost definitely so if a second round of investment is needed) but the investment is similar to that of public stockholders except that it is still within the private regulations and restrictions of access. The venture company hopes to double their money -- or triple or quadruple. They expect to do this within a finite period of time (say two or three years) and the easiest way for them to realize their profits is to then take the private company public -- or to ready them for an acquisition event. So, venture capital investment is often a route to an IPO. The primary difference is the possibility of rapidly building up value before public regulations take hold.
     It should not be needed to be said -- but I'll say it anyway. In the case of investors -- public or private -- not all investments go well. Investors have a bit more protection within public corporations. A venture capitalist will spread their risk -- $10 million spread between 4 companies. One goes bankrupt, two increase their value a little bit (say 10%), and one doubles their investment.  This means (depending on division of investment) that they make a good, but not great, return on their investment. If that successful investment triples their investment then they have made a much larger profit (once again, depending on division of investment). They don't expect every investment to work out but, to stay in business and make the profits they want, the average return needs to be attractive.
     So why would anyone want to stay private? Well, besides avoiding public regulations, there are also stockholder expectations. Some stockholders can be very patient (such as for Amazon which took many years before it showed a profit -- but its stock value kept rising anyway). Most want some type of increase of value (dividend, rising stock value) every quarter. If it stays level (or goes down) for a couple of quarters "short term investors" are likely to start looking around for a "better" investment. Companies hope for primarily "long term investors" but publicly traded means that almost anyone can invest.
     This short-term requirement leads into "next quarter development plans". Long-term development plans, and investment, must be kept limited as the short-term development plans must succeed to keep up the investor interest and stock value. If the company returns to private then they still are expected to make a profit but they can put much more effort, and resources, into longer range plans.
     If you plan to privately run a company for the rest of your life and then pass it along to your children, then there are few reasons to go public. In-N-Out is a good example of such a private company. If you want to leave and go on to your next great venture, then public is the direction to head -- with, perhaps, the assistance of a venture capital company to increase your value first. Every founder, or set of founders, has their own dream and priorities. Best of luck in following your particular dreams!