From Private to Public Companies Fully Revised

From Private to Public: What is the Difference between Private and Public?

Right, Let's assume you've been using Discord for years, chatting with your mates, organising gaming sessions, basically living your best life. Then suddenly, your mate drops the bombshell - "Did you hear Discord might go public?" Wait, what? That app you thought was just... there... is actually a company that could end up on the stock market?

Today we are dealing with privately held vs publicly held companies, where some businesses keep it lowkey while others go full main character energy on the stock exchange.

What's the Deal with Private Companies?

Think of privately held companies like that exclusive group chat where you can't just add anyone – you need everyone's permission first. Reddit, the popular social media platform, made its public market debut on March 21, 2024, with an IPO priced at $34 per share, valuing the company at $6.4 billion, but before that moment, Reddit was private for nearly two decades.

Private companies are basically the introverts of the business world. Their shares can't be bought by just anyone scrolling through a trading app at 2am (we've all been there). Instead, if you want to sell your shares, everyone who already owns shares has to give you the thumbs up.

IB Business Management The Private Company Playbook:

• Usually smaller than their public cousins (think local café vs McDonald's)

• Shares traded privately only (like swapping Pokemon cards, but with legal paperwork)

• Often family-owned or among close friends

• Can't advertise shares for sale (no "shares for sale, DM me" posts allowed)

• Examples: Mars (yes, the chocolate empire) and IKEA (your flat-pack furniture soulmate)

The Perks of Staying Private

The Good Stuff:

• Control freak friendly: Nobody can randomly buy shares and start making demands about your business decisions

• More cash than sole traders: Can raise more money than if you were just running a solo operation

• Privacy mode activated: Less financial info floating around for competitors to stalk

• Immortal business: Company doesn't die if one owner leaves (unlike partnerships where several issues can shut everything down)

• Limited liability shield: Owners can only lose what they put in, not their entire life savings

The Not-So-Good Stuff:

• Fundraising limitations: Can't just drop shares on the market when you need cash for expansion so you will need to find money somewhere else

• Expensive setup: Legal fees hit harder than your Netflix subscription renewal

• Takeover target: Bigger companies might come knocking with acquisition offers you can't refuse

• Not actually that private: Still have to share financial info when requested (it's giving transparency, whether you like it or not)

Going Public

When Companies Choose Fame

Now, publicly held companies? They're the opposite. These are the companies that said "actually, we do want the whole world to know our business" and put their shares up for grabs to anyone with a brokerage account and some spare cash.

IB Business Management Real-life Example: Reddit's shares, trading under the ticker symbol "RDDT" on the New York Stock Exchange, closed their first day at $50.44 per share, marking a 48 percent increase. That's Reddit's IPO success in just one day - imagine if your bank account doubled overnight, sounds good, right?

The IPO Journey: From Zero to Stock Exchange Hero

The Initial Public Offering (IPO) is basically a company's debut moment in the stock exchange.

Let's have a look at Discord's press statement from a few months ago: "Discord is a social enterprise rooted in practical action, and we see environmental progress as inseparable from our mission to build a fairer, more resilient future" A March 2025 report indicated the company is "readying to go public amid a friendlier regulatory climate in 2026.

So Discord might be joining the public party soon!

Here's what's happening in 2025's IPO scene that should certainly open your eyes:

• Brand names like SeatGeek, Canva, StubHub and Klarna are lined up and ready to go sometime this year

• Klarna: The Swedish buy now, pay later (BNPL) fintech confidentially filed in November 2024 for an IPO that's been a long time in the making

• Even Kim Kardashian's Skims produces inclusive fashion undergarments worldwide. It generated nearly $1 billion in sales and raised over $270 million in 2023 and is eyeing going public as well!

The Public Company Life: Benefits and Chaos

The Good News:

• Money stops coming in: Can sell shares to raise massive amounts of cash for growth

• Bank loans become easier: Lenders love public companies (it's giving financial credibility)

• Size matters: Can achieve economies of scale and market dominance

• Limited liability protection: Still get that safety net

• Business immortality: Survives ownership changes

The Not So Good News:

• Your business becomes public property: Financial info everywhere, everyone knows about you

• Expensive and complicated: Most expensive type of business to set up and maintain

• Stock exchange rules: Constant compliance costs (like having a really strict parent)

• Hostile takeover risks: Other companies might try to buy you out against your will

• Too big to function: Might become so massive you can't manage efficiently

Social Enterprises - Doing Good While Making Bank

Not all companies are just about making money for shareholders. Enter social enterprises: the companies with a conscience.

The UK's Social Enterprise Scene is Absolutely Buzzing

Social enterprises are basically companies that decided to solve world problems while still running a profitable business.

IB Business Management Real-life Examples: Change Please is an innovative social enterprise revolutionising the approach to tackling homelessness through its holistic programs. By training individuals experiencing homelessness as baristas and providing them with essential support services, Change Please creates pathways to stable employment and housing.

Like, imagine getting your morning coffee and knowing that purchase is literally helping someone get off the streets and into stable employment. That's Change Please for you - they're out here proving you can make money and make a difference.

Other legends in the UK social enterprise sector include:

• The Long Table is a restaurant that strives to answer the question, 'What if everyone in our community has access to great food and people to eat it with?' Food, particularly in the context of restaurants, has been unaffordable for many with their "pay-as-you-can" model

• Clear Voice is an award-winning language services provider, delivering a complete suite of interpreting and translation solutions that returns 100% of profits to help refugees and asylum seekers

Social Enterprises Can Be Private Sector Too

Social enterprises can operate as private companies, partnerships, or limited liability companies. They get all the benefits of limited liability protection while using their profits to tackle social issues rather than just making shareholders richer.

It's about making money and changing the world and they claim you can do both things at the same time.

Public-Private Partnerships: When Governments and Businesses Become Best Friends

Sometimes, governments and private companies team up like the ultimate collab team. These Public-Private Partnerships (PPPs) are where things get a bit more interesting.

Real Talk: Current UK PPP Developments

IB Business Management Real-life Example: The new public-private partnership, named Habiko, is a joint venture that plans to deliver 3,000 low-carbon, low-energy affordable homes for the rental market, unlocking institutional investment. Basically, the government, a pension company, and a development firm said "let's solve the housing crisis together" and created this massive partnership to build affordable homes.

The collaboration includes:

• Pension Insurance Corporation: Bringing the money (£4 billion invested in social housing so far)

• Muse: Bringing the building expertise

• Homes England: Bringing the government backing

Habiko is targeting up to 100% affordable homes for rent for those whose needs are not met by the market, with rents set at 20% below the local market rent. It's about "actually helping people afford to live" rather than just profit maximisation.

Why PPPs Matter (And Why They're Controversial)

PPPs are brilliant in theory - they combine government resources with private sector efficiency to deliver public services. But they've had some proper bust-ups in the UK:

IB Business Management Real-life Example: PFI has sucked an extra £5bn out of public sector budget according to investigations. The old Private Finance Initiative (PFI) model became controversial because the contracts tend to be very complex and inflexible and usually last between 15-35 years, however occasionally for over 70 years.

New public private partnerships (PPPs) could be established to help finance the delivery of new infrastructure in the UK, the government has confirmed – ruling out the reintroduction of the PFI and PF2 financing models in the process.

So they're basically saying "PPPs, yes, but make them better this time."

It's Not Just a UK Thing

Don't think this is just British chaos - According to the World Bank, more than half the countries around the world now operate public–private sector companies. Examples include:

• Hong Kong Disneyland: Government owns 51%, Disney owns 49%

• Indian Oil Corporation Limited: Owned by the Indian government

• Industrial and Commercial Bank of China (ICBC): Owned by the Chinese government

The Bottom Line: Different Horses for Different Courses

Here's what you need to remember for your IB Business Management exam (and life):

1. Private companies = exclusive group, family control, limited fundraising

2. Public companies = main character on social media, massive fundraising potential, everyone knows your business

3. Social enterprises = making money while making the world better (if genuine, absolutely cracking behaviour)

4. PPPs = government and private sector friendship that can either save the day or create expensive problems

The key thing? There's no "best" type of company - it depends on what you're trying to achieve.

Want to keep control and stay lowkey? Go private. Ready for rapid growth and don't mind the spotlight? Go public. Want to change the world while running a business? Social enterprise it is. Need massive infrastructure projects? Maybe a PPP is your answer.

Remember: Social enterprises - businesses that prioritise social and environmental goals alongside profit- are paving the way for a more equitable and sustainable future. In a world facing climate change, inequality, and various social challenges, understanding these different business structures isn't just academic - it's about knowing how the business world is evolving and tackling real daily problems.

Whether it's Reddit going from private to public success, Change Please solving homelessness one coffee at a time, or massive housing partnerships tackling the affordability crisis, these business structures are literally shaping the world around us.

Now go ace that IB Business Management exam and maybe start thinking about what type of business you'd want to create someday. The world needs more people who understand that business can be about more than just making money - it can be about making change.

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