Acquiring all of a publicly traded company’s stock grants the purchaser ownership over that segment of the company’s equity. However, complete ownership of the company involves additional factors.
Public vs Private Shares
The first step is understanding what fraction of the company’s total equity is publicly traded. Companies often have shares that are held privately, such as those owned by founders or early-stage investors. These privately held shares are not affected by the acquisition of all publicly traded stock.
Voting Rights and Control
Control over a company is closely tied to voting rights associated with its stock. The buyer must ascertain the voting power associated with the publicly traded shares. Companies with dual-class shares may have a significant portion of voting power concentrated in shares that are not publicly traded, and acquiring the public shares may not result in control of the company.
Regulatory Aspects
Large-scale acquisition of a company’s stock usually requires regulatory approval. In many jurisdictions, this entails filing documentation with the relevant regulatory bodies and awaiting their approval or recommendations. Regulatory considerations are especially prominent in cases of full takeovers.
Financial Obligations
Ownership of a company’s stock is separate from its financial obligations, such as debt. These obligations remain with the company after the stock acquisition and become the responsibility of the new majority shareholder.
Rights of Minority Shareholders
Even if one owns the majority of a company’s shares, laws generally protect the rights of minority shareholders. The majority shareholder cannot typically take actions that would unfairly prejudice these minority shareholders.
Corporate Governance Structures
The existing corporate governance structures, including the board of directors and shareholder agreements, may impose additional limitations on what a majority shareholder can and cannot do. These structures must be carefully considered when acquiring a significant share of a company.
Summary
Acquiring all of a company’s publicly traded stock is a significant financial move that grants substantial influence over the company. However, it does not necessarily equate to full ownership or control. Factors such as the distribution of voting rights, the presence of privately held shares, regulatory approval, and the rights of minority shareholders all contribute to the complexities of company ownership.