Public equity

The term public equity refers to equity capital traded on the stock exchange. Like private equity, this form of investment is also an equity investment. This means that investors acquire shares in a company. In the case of a public equity investment, this is done by purchasing shares in a company. As the name suggests, the company shares are traded publicly. This takes place on the stock exchange. As a result, it is only possible to raise capital via public equity if the company is a stock corporation or other form of public limited company.

A comparison of public equity and private equity

Whereas in private equity transactions, an investment is negotiated on a private or small scale and only a small number of privileged investors or investment companies have access to the company shares, anyone can invest in public equity. The shares in a company are traded as shares on the stock exchange and are therefore freely accessible to everyone. Whether an investor wants to invest 5 or 5 million euros is therefore irrelevant. Of course, the higher the investment, the greater the right to have a say at shareholders' meetings, but the rights of influence are far less than with private equity transactions. The advantages of public equity transactions are also the easy resale possibilities of the shares and the lower risk. Companies that have already gone public(IPO) and have become a stock corporation usually have significantly higher capital and securities than young companies.

In addition, the investment is not tied to a specific time period. Whereas in the case of private equity transactions, an investment period of 3-10 years is usually agreed, the company shares acquired as part of public equity transactions can be sold on the stock exchange at any time. With private equity transactions, on the other hand, investors must first find a suitable buyer and the purchase is associated with high transaction costs. For investors, public equity investments also offer the advantage that the companies in which they invest must disclose all information to investors. One disadvantage, however, is that investors have less influence over the company's business.

Similarly, there are advantages and disadvantages for companies. While private equity investments only require little information to be disclosed, entrepreneurs also receive a higher level of support to build up their company. One disadvantage, however, is that the investors can also exert more influence on the company's activities and that it is far more difficult to find a suitable private equity investor who is prepared to take a high risk. When company shares are traded via shares, as is the case with public equity transactions, the search for investors is not in the hands of the company, as its shares are publicly traded on the stock exchange.

Public equity

• is publicly traded on the stock exchange
• any type of investor can invest, regardless of whether their capital is €5 or €5 million
• Shares can be bought and sold at any time
• companies must disclose all information about their company
• the risk for investors is lower as the companies are no longer in their early stages

Private equity

• Shares are traded in private transactions and are only accessible to large investors or investment firms
• The sale of shares can take several years and is associated with high transaction costs
• Higher risk, as companies in which investments are made are usually still very young
• Opportunities for higher returns than with public equity transactions
• less information for investors, as the disclosure requirements for unlisted companies are less extensive.