Why would a public company not initiate secondary stock offerings more often?
Selling stock means selling a portion of ownership in your company.  Any time you issue stock, you give up some control, unless you're issuing non-voting stock, and even non-voting stock owns a portion of the company. Thus, issuing (voting) shares means either the current shareholders reduce their proportion of owernship, or the company reissues stock it held back from a previous offering (in which case it no longer has that stock available to issue and thus has less ability to raise funds in the future).  From Investopedia, for exmaple: Secondary offerings in which new shares are underwritten and sold dilute the ownership position of stockholders who own shares that were issued in the IPO. Of course, sometimes a secondary offering is more akin to Mark Zuckerberg selling some shares of Facebook to allow him to diversify his holdings - the original owner(s) sell a portion of their holdings off.  That does not dilute the ownership stake of others, but does reduce their share of course. You also give up some rights to dividends etc., even if you issue non-voting stock; of course that is factored into the price presumably (either the actual dividend or the prospect of eventually getting a dividend).  And hopefully more growth leads to more dividends, though that's only true if the company can actually make good use of the incoming funds. That last part is somewhat important.  A company that has a good use for new funds should raise more funds, because it will turn those $100 to $150 or $200 for everyone, including the current owners.  But a company that doesn't have a particular use for more money would be wasting those funds, and probably not earning back that full value for everyone. The impact on stock price of course is also a major factor and not one to discount; even a company issuing non-voting stock has a fiduciary responsibility to act in the interest of those non-voting shareholders, and so should not excessively dilute their value. What prevents a company from doing secondary public stock offerings on regular basis? The primary goal of a company doing secondary public offering is to raise more funds, that can be utilized for funding the business. If no funding is needed [i.e. company has sufficient funds, or no expansion plans], this funding creates a drag and existing shareholder including promoters loose value. For example with the current 100 invested, the company is able to generate say 125 [25 as profit]. If additional 100 is taken as secondary public offering, then with 200, the company should mark around 250, else it looses value. So if the company took additional 100 and did not / is not able to deploy in market, on 200 they still make 25 as profit, its bad. There are other reasons, i.e. to fight off hostile acquisition or dilute some of promoters shares etc. Thus the reasons for company to do a secondary PO are few and doing it often reduces the value for primary share holders as well as minority share holders.
"In the US, a private company with less than 500 owners can dictate who can or can't become a shareholder (this is true in general, but I'm sure there are loopholes).   Prior to Google's IPO I could not buy shares in Google at any price.   The reason Google was ""forced"" to go public is the 500 shareholder rule.   At a high level, with 500 shareholders the company is forced to do some extra financial accounting and they no longer can control who owns a share of the company, allowing me to purchase shares of google at that point.  At that point, it typically becomes in the companies best interest to go public. See this article about Google approaching the 500 shareholder limit in 2003. Further, Sorkin is not quite correct that ""securities laws mandate that the company go public"" if by ""go public"" we mean list on a stock exchange, available for general purchase.   Securities laws mandate what has to be reported in financial reporting and when you have to report it. Securities laws also can dictate restrictions on ownership of stock and if a company can impose their own restrictions. A group of investors cannot force a company onto a stock exchange.   If shares of Facebook are already for sale to anyone, then having >500 shareholders will force Facebook to file more paperwork with the SEC, it won't force Facebook onto the NYSE or NASDAQ.   When that point is reached, it may be in Facebook's best interest to have an IPO, but they will not be required by law to do so. Update:  CNN article discusses likely Facebook IPO in 2012. When companies have more than 500   shareholders, they're required to make   significant financial disclosures --   though they can choose to remain   private and keep their stock from   trading publicly. However, most   companies facing mandatory disclosures   opt to go public. The Securities and Exchange Commission   gives businesses lots of time to   prepare for that milestone. Companies   have until 120 days after the end of   the fiscal year in which they cross   the 500-shareholder line to begin   making their disclosures. If Facebook   tips the scale this year, that gives   it until April 2012 to start filing   financial reports." They have, several times (BOS, the Boston Celtics, seems like the most famous such IPO in the US).  They seem to always go private again after a while, though.   Just another company... Really not much to say about it. As JB hints, it is likely due to superior or improving, fundamentals. If the fundamentals of a company improve then its ability to repay loans improves. If its ability to repay improves then more sources of cash become willing to lend to the company. Also if fundamentals are improving then more sources are willing to buy and/or hold the stock. A lot of people in this thread have provided excellent information from a public company's perspective (with respect to WACC, etc.), but I'll chime in from a private company's perspective (specifically, a tech start-up).  Two reasons a private company would prefer to receive financing in the form of debt as opposed to equity:  1) It can't sell equity at a good valuation (or at all). In this case, the company may have no choice but to raise debt financing, using assets as collateral and also diverting future cash flows away from growth initiatives for the sake of servicing the debt. This is obviously a bad situation for the company. Also, because debt is senior to equity, in the case of a bankruptcy, owners would only be able to recover money from the sale of the company / liquidation after debt owners have been paid.  2) The company's owners don't want to further dilute their ownership stakes and are willing to have the company pay interest to avoid it. Sometimes private company owners will take on debt with the purpose of buying out other owners. In some other cases, the company's management thinks equity in their company will increase in value disproportionately to what investors might give it credit for. In these cases, the math is simple: projected valuation growth versus the valuation financing is available at, taking into account the interest paid on the debt. The reason for such differences is that there's no source to get this information. The companies do not (and cannot) report who are their shareholders except for large shareholders and stakes of interest. These, in the case of GoPro, were identified during the IPO (you can look the filings up on EDGAR). You can get information from this or that publicly traded mutual fund about their larger holdings from their reports, but private investors don't provide even that. Institutional (public) investors buy and sell shares all the time and only report large investments. So there's no reliable way to get a snapshot picture you're looking for. "There are two kinds of engagements in an IPO. The traditional kind where the Banks assume the risks of unsold shares. Money coming out of their pockets to hold shares no one wants. That is the main risk. No one buying the stock that the bank is holding.  Secondly, there is a ""best efforts"" engagement. This means that bank will put forth its best effort to sell the shares, but will not be on the hook if any don't sell. This is used for small cap / risky companies.  Source: Author/investment banker" One more scenario is when the company already has maturing debt.  e.g Company took out a debt of 2 billion in 2010 and is maturing 2016. It has paid back say 500 million but has to pay back the debtors the remaining 1.5 billion. It will again go to the debt markets to fund this 1.5 billion maybe at better terms than the 2010 issue based on market conditions and its business. The debt is to keep the business running or grow it. The people issuing debt will do complete research before issuing the debt. It can always sell stock but that results in dilution and affects shareholders. Debt also affects shareholders but when interest rates are lower, companies tend to go to debt markets. Although sometimes they can just do a secondary and be done with it if the float is low. Shares are partial ownership of the company. A company can issue (not create) more of the shares it owns at any time, to anyone, at any price -- subject to antitrust and similar regulations. If they wanted to, for example, flat-out give 10% of their retained interest to charity, they could do so. It shouldn't substantially affect the stock's trading for others unless there's a completely irrational demand for shares. No, there is no minimum employee limit in order for a company to initiate an initial public offering. In the case you mentioned, where a private company owners will take debt with the purpose of  buying out other owners, is this done through a share repurchases program (I understand private companies issue them, even though it's rare)? Thank you for the insights. Your first scenario, involving shareholders in a private corp being limited by a contractual agreement, is common in practice. Frequent clauses include methods of valuing the shares if someone wants to sell, first right of refusal [you have to attempt to sell to the other shareholders, before you can sell to a 3rd party], and many others. These clauses are governed by contract law [ie: some clauses may be illegal in contract law, and therefore couldn't be applied here]. A Universal Shareholders' Agreement is just the same as the above, but applied to more people. You would never get an already public company to convert to a universal shareholders' agreement - because even 1 share voting 'no' would block it [due to corporate law limiting the power of a corporation from abusing minority shareholder value]. In practice, these agreements universally exist at the start of incorporation, or at least at the first moment shares become available. An example is the Canadian mega-construction company PCL*, which is employee-owned. When the original owner transferred the corporation to his employees, there was a USA in place which still today governs how the corporation operates.  In theory you could have a 'public company' where most shares are already owned by the founders, and 100% of remaining shares are owned by a specific group of individuals, in which case you may be able to get a USA signed. But it wouldn't really happen in practice.  *[Note that while PCL is broadly owned by a large group of employees, it is not a 'public company' because any random schmuck can't simply buy a share on the Toronto Stock Exchange. I assume most exchanges would prevent corporations from being listed if they had ownership restrictions like this]. "With regards to ""the stock market,"" there are actually two markets involved here: PRIMARY MARKET Value is created in the primary market where capital is exchanged for a residual interest in an opportunity.  As a theoretical example, if a person operating solo (or with a small team) were to discover or create a breakthrough product, such as an retro-aging pill, that person likely wouldn't have the financial means to fully capitalize on his new-found idea.  Others with more capital may also soon discover his idea or improve upon it and exploit it before he has a chance to. For a real life example, a person studying at a California university during the 1990s discovered a method to index internet webpages and was approached by some students after a talk on the subject.  He returned to his native southern Europe country seeking funds to develop the web-indexing business and failed to do so.  Two of the students that approached him found capital readily available from investors in their campus sphere; their business is today one of the biggest in the world.  They had exchanged part of their residual interest for capital to develop their business. The primary market of the stock market works mostly same in creating value.  It is also dependent upon the secondary market. SECONDARY MARKET The secondary market indicates the day-to-day value of an enterprise.  That market allows shareholders to manage their risk appetites and the enterprise's operators to execute their shareholders' interest for gains.  In most cases, a secondary market reference will be used for pricing a primary market issuance.  Without that reference, capital would be allocated less efficiently creating additional costs for all involved, issuers and investors. Consider what would happen if you sought to purchase a house and the mortgage lenders had no indication what the property was worth.  This would make capital very expensive or possibly deny you access to credit.  By having an indication, all involved are better off.  That is value creating. There are some large developed economies' equity markets, such as that in Germany, where many large enterprises stay privately held and credit financing, mostly from banks, is used.  The approach has proven successful as well. So why do some nations' financial markets still rely on capricious stock markets when private credit financing may do just fine in many cases?  It's largely a matter of national culture.  Countries such as the Netherlands, the UK and the US have long had active equity markets in continuous use that investors have trusted for centuries. CONCLUSION When leaders of an enterprise wish to grow the business to a large size with investment from the stock market, they aren't limited by the size of their banks' capital.  Those leaders and their prospective investors will rely on the secondary market to determine values.  In addition, if the leaders raise equity instead of debt capital, they are usually accorded more flexibility to take risks since shareholders usually have their own flexibility to transfer those risks to other investors if for any number of reasons they choose to do so. Stock markets create value in many other ways.  The above are the main ways." My answer is not specific, or even maybe applicable, to Microsoft. Companies don't want to cut dividends. So they have a fixed expense, but the cashflow that funds it might be quite lumpy, or cyclical, depending on the industry. Another, more general, issue is that taking on debt to retire shares is a capital allocation decision. A company needs capital to operate. This is why they went public in the first place, to raise capital. Debt is a cheaper form of capital than equity. Equity holders are last in line in a bankruptcy. Bondholders are at the front of the line. To compensate for this, equity holders require a larger return -- often called a hurdle rate. So why doesn't a company just use cheaper equity, and no debt? Some do. But consider that equity holders participate in the earnings, where bondholders just get the interest, nothing more. And because lenders don't participate in the potential upside, they introduce conditions (debt covenants) to help control their downside exposure. For a company, it's a balance, very much the same as personal finances. A reasonable amount of debt provides low-cost capital, which can be used to produce greater returns. But too much debt, and the covenants are breached, the debt is called due immediately, there's no cash to cover, and wham! bankruptcy. A useful measure, if a bit difficult to calculate, is a company's cost of capital, and the return on that capital. Cost of capital is a blended number taking both equity and debt into account. Good companies earn a return that is greater than their cost of capital. Seems obvious, but many companies don't succeed at this. In cases where this is persistent, the best move for shareholders would be for the company to dissolve and return all the capital. Unfortunately, as in the Railroad Tycoon example above, managers' incentives aren't always well aligned with shareholders, and they allocate capital in ways advantageous to themselves, and not the company. There could also be some degree of dilution at play here. If they are rapidly expanding and hiring, or if they took on another round of funding each share may have a lower amount of value though the company might be worth more than they were previously. The newly issued options may also be of a different class. "A company doesn't offer up 100% of its shares to the market.  There's a float amount of varying significance, maybe 30% of the shares are put up for public offer.  Generally some amount of current shareholders will pledge some or all of their shares for offer to the public.  This may be how the venture capital, private equity or other current investors cash out their initial investment.  The company may issue new shares in order to raise money for some initiative.  It may be a combination of existing shares and new. Additionally, a company may hold some ""treasury shares"" on its balance sheet.  In this instance fluctuations in the share price directly affect the health of the balance sheet. As far as incentive goes, stock options to management and C-Suite employees keep everyone interested in an increasing stock price."