Unquoted Public Company

Unquoted Public Company

An unquoted public company (also called an unlisted public company) is a company that has issued shares to the public but does not have those shares listed on a public stock exchange. Instead, its securities trade privately—typically in over-the-counter (OTC) markets—or via private transactions between buyers and sellers.

Key points

• Shares are publicly issued but not listed on a formal exchange.
• Trading usually occurs OTC or through private placements.
• These companies face fewer exchange regulations than listed firms but remain subject to some public-company reporting and takeover rules.
• Common trade-offs include greater operational flexibility versus reduced liquidity and transparency.

Why a company might remain unquoted

• It does not meet exchange listing requirements (minimum earnings, shareholder counts, or share float).
• Management prefers to avoid disclosure and governance requirements associated with listing.
• Cost savings: listing and compliance can be expensive.
• The company has been delisted (voluntarily or for failing to meet standards).
• Owners want to maintain tighter control or plan for a private-style governance structure while retaining some public ownership characteristics.

How trading works and valuation challenges

• Trading venue: Unquoted shares are traded OTC through broker-dealers or via direct private transactions. OTC transactions are typically less transparent—trade prices and volumes may not be publicly visible.
• Liquidity: These shares are often illiquid; trades can be infrequent and hard to execute quickly.
• Valuation: Without an active market price, valuation relies on financial models such as comparables (looking at similar companies, recent private transactions, or buyouts), discounted cash flow models, or negotiated private deals. Valuations can vary widely and be difficult to verify.

Differences from listed companies

• Regulation and disclosure: Listed companies must meet exchange and securities-regulator requirements for ongoing disclosure, audited reporting, and corporate governance. Unquoted public companies generally face fewer public reporting obligations, though some reporting rules may still apply.
• Market access and liquidity: Listed shares trade on public exchanges with continuous pricing and higher liquidity. Unquoted shares are harder to buy or sell and may be subject to transfer restrictions.
• Strategic focus: Listed firms often emphasize short- to medium-term shareholder value metrics (stock price, dividends). Unquoted public companies may prioritize long-term control, operational flexibility, or preparing for an acquisition or private transaction.

Investor risks

• Low liquidity — difficulty exiting positions or converting shares to cash.
• Limited transparency — fewer publicly available financial disclosures and less market information.
• Valuation uncertainty — prices are often based on infrequent private transactions rather than continuous market pricing.
• Potential restrictions — transfer restrictions or bans on public marketing to investors can limit marketability.

How investors buy and how companies raise capital

• Buying routes: Private transactions, negotiated purchases through intermediaries, or OTC broker-dealers. Trades may require direct negotiation and are often available primarily to institutional or high-net-worth investors.
• Capital raising: Unquoted public companies typically raise funds via private placements—selling shares to institutional investors, venture capital, or accredited individuals—rather than by public offerings on an exchange.

Illustrative example

If a large listed company chose to delist and become unquoted, its shares would no longer trade on the exchange. Investors wishing to buy or sell would need to transact OTC or via private deals. Information disclosure could be reduced, trading would be less liquid, and valuation would rely on private transactions and comparisons with similar firms.

Conclusion

An unquoted public company combines elements of public ownership with the limited visibility and market access typical of private firms. That structure can reduce compliance burdens and preserve owner control, but it introduces significant liquidity, transparency, and valuation risks for investors. Understanding these trade-offs is essential before investing in or operating an unquoted public company.