There are basically two types of markets which allow investors to invest capital and companies to raise capital for returns.
However, the functions of the two markets are different. The public market allows all types of investors to purchase listed securities. On the other hand, investments are accessible only to a small number of insiders, such as institutional investors and ultra-high-net-worth individuals in private markets, investments which are not publicly traded on an exchange.
Unlike public equity (stocks), private markets are less liquid due to lack of market transparency. This article provides a detailed guide of public and private investment markets.
##<From an investor's perspective: What are the differences? >
Let's use these points to explore the difference between public and public markets.
H3:Return value
Liquidity risk brings high returns to private markets. This means that investors interested in private equity or other investment options should be prepared for higher returns even with lower liquidity.
###-Liquidity
Public markets are notorious for their high liquidity, which has recently increased significantly with the advent of many digital platforms. By contrast, the private placement market has always been illiquid. However, the growth of the secondary market, especially LP and GPS, is starting to make the market more fluid.
###-Volatility
Public markets exhibit higher volatility as prices are determined by the extensive trading activity of public investors. As such, stock prices may be over- or undervalued based on market sentiment and many other factors, creating risk for investors when evaluating stock prices and potential returns. Private markets are not listed, but have significantly lower volatility than public markets.
###-Information transparency
The dissemination of information is limited in the private market because there is no obligation to disclose information as there is in the public market. A public market fully discloses its performance and financials to investors.
##<From a company’s perspective: What are the differences? >
###-Property
Private company shares are typically held by a small group of corporate members, institutional investors, and individual shareholders. This allows companies to maintain a very active ownership approach and focus on adding value through operational improvements.
Public companies are owned and controlled by shareholders who buy and sell securities. Since stocks can be publicly traded, dilution of ownership makes it difficult for most public companies to change operations.
###-Loan
Public companies can generally issue new shares or use debt to grow their business. Private companies may face higher debt acquisition costs and may not be able to raise funds from public investors, but the rise of private markets means private companies have more private property and access to financing. you can get the opportunity.
###-Sustainability
Long-term equity ownership by private companies represents a long-term sustainability strategy. Companies are encouraged directly by their shareholders or bondholders to implement strategies that have the potential to create long-term value. There may be cases.