What is the relation between public and private markets?

 Private capital markets and public markets both allow companies to accept investments from people in order to utilize the gained sum of money to fund their current operations or expand their businesses. However, investing in a private market is quite different from investing in a public market.

To help you understand the relation between the two markets, here’s a short comparison -

  1. The requirement to report - Unlike public companies, private companies are not required to report their financials every quarter. This allows private companies to keep save time on the efforts taken to do the reporting and also helps to keep their exact competitive advantage a secret.
  2. The valuation of the company - A private company is harder to evaluate as they do not make a lot of information about themselves public. However, public companies are a relief in this domain as with just a simple search on the internet, you can get all the required information to make a correct investment decision. The valuation of the private companies is not affected by the price movements in the public market and thus makes the private market less volatile.
  3. The regulation applicable - Public companies have a lot more rules and regulations to follow when taking business decisions as compared to their private counterparts. As a result, a private company can take bolder business decisions to stimulate their growth and increase their sales.
  4. The starting capital required - You can start your investment journey in the public capital market for as little as $1. However, to invest in the private capital market, one should either be an institutional investor or an accredited one, retail investors are not allowed to become a part of the private capital market.

I hope this answer helps you get clarity as to what is the relation between public markets and private capital markets.

Source :- What is the relation between public and private markets

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