Public Equity Difference Between Private and Public Equity


Public equity is a popular investment option among investors. Typically considered safer in comparison to private equity, public equity can also be liquidated easily and is readily available to all. Companies utilize public equity funds as a tool for generating finances from the public. These funds are known as IPO: initial public offering. When companies go public, it offers shares to everyone in the market and therefore has to act in its shareholder’s interest. Read on to know more about public equity, its features, and how it differs from private equity

What Is Public Equity?

Public equity meaning essentially refers to shares or ownership of a public company, i.e., a company that is listed on a public stock exchange like the BSE or NYSE.  When a company goes public it essentially allows the public to buy ownership rights in their business. assets which can be traded in seconds as and when needed. This gives the right to an individual to hold a small share of the company from the public hence, making it public equity. Public equity tends to be fairly liquid, though liquidity varies across sectors, and companies based on demand and supply. .

Benefits Of Investing In Public Equity

There are numerous advantages to investing in public equity; here are the three most significant ones:

Additional income:For some stocks, dividends can be earned in the form of additional payments to investors by the public company. This is added income on top of the generated gains from stock trading, regardless of the market value of the stock.

Capital Gains: Public equity has great potential for garnering good gains in investments over time. Daily stock values may fluctuate, but the stock market value tends to go up over time. Thus if a stock you bought appreciates over time, you can be said to have made ‘capital-gains’.

Sope for liquidity:Public equities have relatively more scope for liquidity in comparison to other types of investment or asset classes. They can be traded within seconds on the exchanges.

Risks Of Investing In Public Equity

The risks of investing in public equities include:

Systematic Risk:Also known as market risk, this can lead to large-scale financial losses in the market due to events like recession or a market collapse.

Unsystematic Risk: Also known as a business risk, this refers to company-specific upheavals that can lead to financial losses related to the stocks of that particular company.

Risks related to liquidity: Stock markets are seen as liquid markets, where stocks and bought and sold at lightning speed. Liquidity is one of public equity’s strengths. However, there is a caveat. If the company selling public shares is not that well known or if the stock exchange operates on a smaller scale, the sale of stocks becomes much more challenging. As a result, the financial losses sustained can be quite damaging.

Difference Between Private and Public Equity

Private equity is another common term that often comes up when talking about public equity. As the name suggests, private equity investments are limited to stocks offered by a private company. These companies target a certain demographic, and only investors from this group are allowed to invest. Here are the differentiating features of private and public equities:

Definition: Public equity shares represent the investor’s ownership in a public company’s business. Private equity shares represent the investor’s ownership in a private company’s business.

Privacy:Public companies are under obligation to be completely transparent about their business and financial activities with the public. Private companies are under no such obligation to disclose this information to the public.

Prospects:Due to the burden of public pressure, public equity fares better in the short term whereas private equity investments can perform in the long term.

Open to:Public equities are open to the general population, whereas private companies target high net-worth individuals.

Trading freedom:Public equities can be traded in the general population. Private companies require the consent of the company founder in order to do the same.

Regulatory restrictions:Public companies are subject to stricter regulations as compared to private companies.


Public equity shares present very attractive investment opportunities not just for experienced investors or high net-worth candidates but for everyone. Investing in equities that are sustainable can be very beneficial in terms of returns. Many companies transition from private to public in times of financial need. The growing number of IPOs in the market today is indicative of more and more companies as well as investors developing an interest in the stock market’s potential. Thanks to public equities the common man can have a stake in a business and build on their investment returns. Research is a critical step for any investor, new or seasoned, looking to invest in a public company’s shares. Maintaining a balanced portfolio goes a long way in bringing good returns over time.