IB Business Management Topic 1.2.5 Publicly Held Companies Revision Notes (SL/HL)

IB Business Management Topic 1.2.5 Publicly Held Companies Revision Notes (SL/HL) | RevisionDojo

Written by official IB examiners

Publicly Held Companies: Features, Advantages, and Risks

Jojo is the CEO of a rapidly growing tech startup.
Jojo needs significant capital to expand globally, but traditional funding sources are limited.

Going public, selling shares on a stock exchange, could be the solution.

Key Features of Publicly Held Companies

Definition

Publicly held company

Publicly held companies are businesses that sell shares to the public through stock exchanges, allowing them to raise substantial capital.

1. Shareholder Influence

Ownership and Voting Rights: Shareholders own the company and typically have voting rights proportional to their shares.
Decision-Making: Major decisions, such as electing the board of directors or approving mergers, require shareholder approval.
Annual General Meetings (AGMs): Shareholders can question management and vote on key issues.

Example

If you own 10% of a company's shares, you have 10% of the voting power.

Tip

Shareholders with more than 50% of the shares have controlling interest, allowing them to influence company strategy.

2. Regulatory Requirements

Transparency: Public companies must disclose financial statements, executive compensation, and strategic plans.
Compliance: They must adhere to regulations set by governing bodies like the U.S. Securities and Exchange Commission (SEC) or the UK's Financial Conduct Authority (FCA).
Audits: Independent audits ensure accuracy and reliability of financial reports.

Common Mistake

Note

Students often confuse publicly held companies with public sector organizations.
Publicly held companies are privately owned but trade shares publicly, while public sector organizations are government-owned.

3. Liquidity and Marketability

Shares are Traded Publicly: Investors can buy or sell shares on stock exchanges, providing liquidity.
Market Valuation: The company's value is determined by its market capitalization ($\text{share price} \times \text{number of shares}$).

Example

Tesla's market capitalization surpassed Toyota's in 2020, reflecting investor confidence in its future growth.

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Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

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Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.

Duis aute irure dolor in reprehenderit

Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

Note

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam quis nostrud exercitation.

Excepteur sint occaecat cupidatat non proident

Nemo enim ipsam voluptatem quia voluptas sit aspernatur aut odit aut fugit, sed quia consequuntur magni dolores eos qui ratione voluptatem sequi nesciunt. Neque porro quisquam est, qui dolorem ipsum quia dolor sit amet, consectetur, adipisci velit.

Tip

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.

Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

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Publicly Held Companies: Features, Advantages, and Risks

Jojo is the CEO of a rapidly growing tech startup.
Jojo needs significant capital to expand globally, but traditional funding sources are limited.

Going public, selling shares on a stock exchange, could be the solution.

Key Features of Publicly Held Companies

Definition

Publicly held company

Publicly held companies are businesses that sell shares to the public through stock exchanges, allowing them to raise substantial capital.

1. Shareholder Influence

Ownership and Voting Rights: Shareholders own the company and typically have voting rights proportional to their shares.
Decision-Making: Major decisions, such as electing the board of directors or approving mergers, require shareholder approval.
Annual General Meetings (AGMs): Shareholders can question management and vote on key issues.

Example

If you own 10% of a company's shares, you have 10% of the voting power.

Tip

Shareholders with more than 50% of the shares have controlling interest, allowing them to influence company strategy.

2. Regulatory Requirements

Transparency: Public companies must disclose financial statements, executive compensation, and strategic plans.
Compliance: They must adhere to regulations set by governing bodies like the U.S. Securities and Exchange Commission (SEC) or the UK's Financial Conduct Authority (FCA).
Audits: Independent audits ensure accuracy and reliability of financial reports.

Common Mistake

Note

Students often confuse publicly held companies with public sector organizations.
Publicly held companies are privately owned but trade shares publicly, while public sector organizations are government-owned.

3. Liquidity and Marketability

Shares are Traded Publicly: Investors can buy or sell shares on stock exchanges, providing liquidity.
Market Valuation: The company's value is determined by its market capitalization ($\text{share price} \times \text{number of shares}$).

Example

Tesla's market capitalization surpassed Toyota's in 2020, reflecting investor confidence in its future growth.

Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Note

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam quis nostrud exercitation.

Excepteur sint occaecat cupidatat non proident

Tip

Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

Unit 1: Introduction to Business Management - Core operational components and business functions6 subtopics

Unit 2: HR Management - Motivation, Structure, Hierarchy7 subtopics

Unit 3: Financial Management - Accounting, Ratio evaluation, Core Financial Documents9 subtopics

Unit 4: Marketing Management - The 7 P's, strategies and forecasting6 subtopics

Unit 5: Operations Management - Production Methods, Production planning and management9 subtopics

BM Toolkit - Core business frameworks and tools15 subtopics

IB Business Management 1.2.5 Publicly Held Companies Notes

Unit 1: Introduction to Business Management - Core operational components and business functions6 subtopics

Unit 2: HR Management - Motivation, Structure, Hierarchy7 subtopics

Unit 3: Financial Management - Accounting, Ratio evaluation, Core Financial Documents9 subtopics

Unit 4: Marketing Management - The 7 P's, strategies and forecasting6 subtopics

Unit 5: Operations Management - Production Methods, Production planning and management9 subtopics

BM Toolkit - Core business frameworks and tools15 subtopics

Publicly Held Companies: Features, Advantages, and Risks

Key Features of Publicly Held Companies

1. Shareholder Influence

2. Regulatory Requirements

3. Liquidity and Marketability

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account

Publicly Held Companies: Features, Advantages, and Risks

Key Features of Publicly Held Companies

1. Shareholder Influence

2. Regulatory Requirements

3. Liquidity and Marketability

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account