Public companies are a key part of the American economy. They play a major role in the savings, investment, and retirement plans of many Americans. If you have a pension plan or own a mutual fund, chances are that the plan or mutual fund owns stock in public companies. Like millions of Americans, you may also invest directly in public companies.
The term “public company” can be defined in various ways. There are two commonly understood ways in which a company is considered public: first, the company’s securities trade on public markets; and second, the company discloses certain business and financial information regularly to the public.
In general, we use the term to refer to a company that has public reporting obligations. Companies are subject to public reporting requirements if they:
A private company also can become subject to public reporting requirements by merging with a public shell company. This process is called a reverse merger. As with any investment, investors should proceed with caution when considering whether to invest in reverse merger companies.
As mentioned, we view companies as public if they are subject to public reporting obligations. There are instances, however, where the securities of a company that does not regularly report business and financial information to the public are nonetheless traded on smaller public markets. Investing in these companies is riskier as there can be little public information to allow investors to make an informed investment decision.
A public company’s disclosure obligations begin with the initial registration statement that it files with the SEC. But the disclosure requirements don’t end there. Public companies must continue to keep their shareholders informed on a regular basis by filing periodic reports and other materials with the SEC. The SEC makes these documents publicly available without charge on its EDGAR website. The filed documents are subject to review by SEC staff for compliance with federal securities laws.
Following are some of the reports that may be filed by U.S.-based public companies. Foreign companies that file reports with the SEC may file different types of reports.
Our federal securities laws are based on public disclosure by companies of meaningful business, financial and other information. Public disclosure by companies serves to advance the mission of the SEC.