Explore BrainMass

Public relations - How does the privately held company's efforts to appeal to the public differ from that of the publicly held one?

Choose a publicly held company and a privately held company in the same industry (e.g., a privately held food company and a publicly held food company). publicly held companies are required to divulge certain information to the investing public. But privately held companies aren't held to such standards because they are not seeking investors. Nevertheless, many privately held companies divulge certain statistical and financial information that publicly held companies are required to do. Why do you think they do that? Compare and contrast the financial information provided by the two companies you've chosen. How does the privately held company's efforts to appeal to the public differ from that of the publicly held one? Provide examples.

A source for privately held companies is http://www.forbes.com/2004/11/10/04privateland.html.

A source for publicly held companies is http://money.cnn.com/magazines/fortune/fortune500/.

Solution Preview

Public companies must file the quarterly & annual reports with the Securities & Exchange Commission (SEC), disclosing financial & other relevant information for the investors. According to the Sarbanes - Oxley Act of 2002, public companies should strictly follow disclosure requirements. Many critics argue that this law drives up the cost of being a public company. It is not necessary for the private companies to disclose their financial information to anyone. i.e management does not have to answer to stockholders & it is not required to file disclosure statements with the SEC.
Yet many private companies reveal their financial information's. Because, the cost of rising a capital is less in public companies when compared with the private companies. i.e public companies can sell stocks or bonds to raise additional funds. Similarly investors in public companies can buy or sell stock easily, allowing them to respond quickly to a changing market. While stock in a privately held company may be difficult to sell quickly & this could result in a significant drop in value. Besides, private companies can not dip into the public capita markets & must therefore turn to private sources. This can boost the cost of financing & may limit the expansion & growth of private companies.
Thus, private companies are now divulging their financial information's as their cost of raising the finance is high ...

Solution Summary

A discussion of the PR issues for a privately held company and its appeal versus a publicly held company.