Public Limited Companies
Business: Cambridge International GCSE (2027 Exams), topic 1.4.5
Public Limited Companies
Public limited companies sell shares on the stock exchange. This means that anybody over 18 can buy shares (often through brokers). Firms often become public companies when they want to expand because selling shares on the stock exchange allows them to raise finance for investment. In 2017, Snapchat went through this process (which is called a flotation).
Advantages
- Selling shares on a stock exchange allows companies to raise money for investment, which enables the company to grow faster or bigger.
- It is much easier for companies to raise capital (money) from banks if they are public limited companies because they present less of a risk (given the number and size of investors).
- Shareholders have limited liability because the company is incorporated.
Disadvantages
- Owners often have very little say over how the business is run. This means that it can be hard to agree on how the business is run.
- Anyone can take over the company if they are able to buy enough shares. When shareholders own more than half the shares, then they will have control over the company.
- For example, in 2022 Elon Musk was able to take over Twitter (now called X) by buying a majority of its shares.
- The company’s accounts must been made public. This means that competitors can see how well the company is doing.
Examples
- Well-known UK public limited companies include Tesco plc, BP plc, and Rolls-Royce plc.
- These are large businesses with shares traded openly on the London Stock Exchange.
Test yourself on Public Limited Companies
Public limited companies
Topshop shares are not available for purchase by the public. What type of limited company is Topshop?