Every share available for purchase in the stock market is issued by a publicly traded company. A company generally becomes publicly traded by making an initial public offering (IPO) of shares in the company, which helps it raise capital. The IPO process gives both investors and the company a powerful way to create wealth.
How does a company go public?
The stock market has proven over its history to be one of the greatest vehicles of wealth generation ever. The U.S. stock market's market capitalization -- the total value of all of the shares issued by publicly traded U.S. companies -- is now roughly $50 trillion.
It's important for investors to understand the distinction between public and private companies, as well as the requirements publicly traded companies must comply with.
Market Capitalization
One reason companies go public is because doing so creates an opportunity for insiders to sell their equity holdings. A company's initial public offering of shares effectively converts the private equity holdings of business insiders and investors into publicly traded shares, which those insiders and investors can choose to sell on the open market. Companies can also become publicly traded by being acquired by, or merging with, a special purpose acquisition company (SPAC), which is a shell business structure established for the specific purpose of taking a promising company public. But whether the going-public process occurs by IPO or SPAC, the outcome is the same. The company goes from being privately held to publicly traded.
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Largest publicly traded companies
The chart below shows the 10 largest publicly traded companies in the U.S.
Company | Ticker | Sector | Market cap |
|---|---|---|---|
Apple | NASDAQ:AAPL | Technology | $3.4 trillion |
NVIDIA | NASDAQ:NVDA | Technology | $3.19 trillion |
Microsoft | NASDAQ:MSFT | Technology | $3.06 trillion |
Alphabet | NASDAQ:GOOG, NASDAQ:GOOGL | Technology | $2.07 trillion |
Amazon | NASDAQ:AMZN | Technology | $1.9 trillion |
Meta Platforms | NASDAQ:META | Technology | $1.4 trillion |
Berkshire Hathaway | NYSE:BRK.A, NYSE:BRK.B | Various | $982 billion |
Eli Lilly | NASDAQ:LLY | Pharmaceuticals | $826 billion |
Broadcom | NNASDAQ:AVGO | Technology | $821 billion |
Tesla | NASDAQ:TSLA | Industrials | $771 billion |
Technology companies dominate today's public markets, as the chart above makes clear. Six of the most valuable U.S. companies today are tech companies, and many consider Tesla (TSLA -0.87%), a maker of electric vehicles, to be a tech company as well.
The internet has become the most important force in modern business and has created winner-take-most businesses across much of the tech industry. Apple (AAPL +0.33%) is the dominant maker of devices such as smartphones and tablets, while Microsoft (MSFT +0.17%) maintains a market-leading position in enterprise software. Amazon (AMZN +2.64%) is the clear leader in e-commerce and cloud computing, and Alphabet (GOOG -2.21%)(GOOGL -2.37%) and Facebook (META +0.15%) are the titans of digital advertising. NVIDIA (NVDA -0.71%) has established itself as the leading maker of graphics processing units (GPUs), which are used in everything from artificial intelligence to self-driving cars to gaming. All of these companies still have considerable growth opportunities in front of them, especially for enterprises of such large sizes, and most of them generate attractive profit margins, which are emblematic of the strong competitive advantages they enjoy.
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