What it is:
How it works/Example:
The primary activity involved in going private is deregistering a company's securities with the SEC. Companies that were once public can go private if it has fewer than 300 shareholders (or fewer than 500 shareholders in some circumstances). Companies might also go private when another company or entity makes an stock split that brings the number of shareholders below the legal threshold.
When those things occur, the company becomes ineligible for listing on an exchange or registration with the SEC, according to rule 13E-3 of the Securities Exchange Act. A company must file a Schedule 13E-3 to officially go private.
Why it matters:
Going private can happen for several reasons. One of these reasons is that a company's
There are several advantages to going private as well, particularly fewer special governance considerations and fewer disclosure requirements that can be time-consuming and expensive. Going private also means less coverage, media coverage, and pressure to address both short-term and long-term trends in the share price.