Unquoted Public Company - Explained
What is an Unquoted Public Company?
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Table of ContentsWhat is an Unquoted Public Company?How Does an Unquoted Public Company Work?Reasons for an Unquoted Public CompanyTrading and Valuation
What is an Unquoted Public Company?
An unquoted public company is a public company that is not listed on any exchange. Such a company might have previously traded on an exchange but demoted to an unquoted public company due to financial distress. An unquoted public company is otherwise called an unlisted public company. This status is attained by a firm whose equity shares are not trading or no longer being traded on a stock exchange.
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How Does an Unquoted Public Company Work?
Usually, before a public company can be listed on a stock exchange, certain requirements must be met. These requirements vary from one exchange to another. An unquoted public company is not listed on any exchange, which could be as a result of a decline in its market capitalization or inability to meet an exchange's listing requirements. Unlisted or unquoted public companies trade over-the-counter (OTC).
Reasons for an Unquoted Public Company
These are the major reasons why a public company can be unlisted or unquoted;
- Small market capitalization.
- Failure to meet the requirements of a stock exchange listing.
- Having an insufficient number of shareholders needed for a company to be listed.
- Removal of a previously listed company from the stock exchange, this is also called delisting.
- Avoidance of ownership disclosure by the management of a company, which is a requirement for stock exchange listing.
Regardless of whether a public company is listed on an exchange or not, they are expected to comply with the financial reporting requirements and other regulations.
Trading and Valuation
The shares or securities issued by unlisted public companies are called unlisted securities, these securities are not traded on any exchange but in over-the-counter markets (OTC). The difference between the OTC markets and the stock exchanges is that the former are less transparent, sometimes investors are left in the dark about the prices at which transactions were completed. It is important to know that the stocks of an Unquoted Public Company is illiquid and thereby not traded on the OTC markets. Here are some facts you should know about an unquoted public company;
- An unquoted company refers to a public company that is not listed on any exchange, it is otherwise called an unlisted company.
- A company that has previously issued shares through an IPO but no longer traded on the stock exchange can also be called an unlisted company.
- A company previously listed can also be delisted either voluntarily or failure to meet the requirements of an exchange listing. This is also called an unquoted public company.
- Securities or shares issued by unlisted public companies are traded in the OTC markets and not on stock exchanges.