Can a company with a very large valuation still be held privately?

Question

We see many companies with extremely high valuations like Microsoft, Google, Amazon etc. All these companies are held publicly. (Although the founder might be holding a large portion of the shares; I am not asking about that.)

In the past, these companies invented something and needed huge money to implement it on large scale. So they went public; sold their equity to others, and their valuations grew big.

But could there be a case where a company invents something which is much more valuable and in-demand. The founder invests their own money and does not sell their equity. Assume that they already have all the money necessary, or the company does not need much money at all to implement the invention in production, or the company implements the invention in production on a small scale first and grows in size by investing the profits back, or... etc.

My question is:

• Is this scenario practically possible? Are there any examples?
• Are there any legal restrictions that mean companies have to go public after certain stage?

Although I mentioned "legal restrictions", I am not looking for country-specific scenario.

Answer 1

Is this scenario practically possible?

Absolutely - there is no legal requirement in the US to become publicly traded.

Are there any examples?

The top 25 private US companies all have annual revenues over $14B. The 5th largest has annual revenue of $41.9B, and the top has annual revenue of $165B. Here are the top 5:

1. Cargill (agriculture): $165 Billion
2. Koch Industries (oil refining): $115 Billion
3. Publix Super Markets: $48 Billion
4. Mars, Incorporated (candy): $45 Billion
5. Pilot Company (Truck stops): $42 Billion

Note that they are ranked by revenue, since calculating "market cap" can be very difficult for companies that aren't publicly traded, but to get a sense of scale, the bottom companies of the S&P 500 have annual revenue around $10B, so all of these 25 would likely be in the S&P 500 (the S&P 500 is selected by market cap, but revenue should be roughly similar in order with some exceptions).

One thing to dispute your premise - all of the top 5 have been in business since the 1950s at least (Cargill since the 1800s), so their size is not necessarily due to a "big bang" invention, but to slow, steady growth over decades. Going public is generally required for rapid growth at that scale.

Answer 2

Twitter/X

Not only can companies remain privately held throughout their lives, they can also go public and then revert to private ownership, as in the recent case of Twitter.

This list of other large privately held corporations should dispel any doubts about limits on the size of private corporation ownership, pretty much anywhere in the world. At the top of the list is Vitol, with revenues of about half a trillion dollars per year. This would put it at the #2 spot on the Fortune Global 500 list, which includes public, private, and even state-owned enterprises. The only reason it is not included is that as a private corporation, it is very secretive about its financials, so Fortune is not confident about its position.

Answer 3

And then there's even the extreme case of Dyson, which is reported to be 100% owned by a single person, founder James Dyson.

The company made $7.8 billion in 2022. Since it is private the valuation is not as easy as market cap, but James Dyson's fortune is estimated at $15.9 billion, so that gives you an idea.

Then as detailed in other answers, there are plenty of extremely large companies which are family-owned. Sometimes only siblings, sometimes more extended family (usually depends a lot on how many generations there have been since founding).

Answer 4

In the US, at least, there is no requirement to take a company public.

Remember that the reason for selling stock is to turn part of the company's value into money. If the company is profitable enough and does not have sudden exceptional needs, it (and its owners) may not need that cash infusion; ordinary business loans may be sufficient.

Owners taking profit from a company by selling it off is a relatively recent pattern.

Answer 5

There is certainly no reason why a company, of any size, must go public, at least in the U.S.

There are really only two reasons to go public, realistically:

• The company can raise capital and would prefer to raise by selling stock than by borrowing or some other arrangement.

• The current owner(s) of stock can get a huge payday.

You can probably guess that the second reason is much more popular; most companies choose to raise needed capital by private stock sales.

Note also that the current owner(s) of the stock can include the founder, employees, venture capitalists, private equity firms, and almost anyone else. If any of these parties wants to collect anything more than dividends, they must sell their stock. It is generally believed that a company's market capitalization increases considerably when it goes public; therefore, anyone who owns stock, and wants to sell, would benefit from a public sale, rather than a private one.

On the other hand, there are a number of disadvantages of "going public":

• The Securities and Exchange Commission (SEC), or the non-U.S. equivalent in the relevant country, has many requirements for not only how the company must conduct the initial public stock offering, but also how the company must be run. So, after the IPO, the company's officers have much less latitude for how they do certain things (especially accounting, but others, too).

• The company's officers must now answer to the stockholders. This is the reason why Bose is still a private company: when Amar Bose died he owned the company, and he stipulated in his will that MIT would become the owner, and would be forever prohibited from taking it public, so impatient stockholders would not impose limitations on R & D spending, among other things.

Besides Bose, there are many privately held companies that have never been publicly traded. The second example that comes to mind is that, until Apple bought them for $3B, Beats Electronics and Beats Music were privately held.

Answer 6

Adding to the list of examples,

Valve

Steam's developer Valve Corporation made about 4 billion in revenue in 2017 according to SteamSpy:

earned a massive $4.3B in 2017, $800M more than the estimated $3.5B it earned through the same period in 2016. While SteamSpy's figures can't account for every bit of revenue Valve might have earned, the data it's missing from DLC and microtransactions only understate the true size of Valve's giant.

(This is calculated and not reported by Valve so not an exact number), and has over 150 million users according to The Verge:

Although it remains the biggest PC game marketplace, with more than 150 million registered users, the company clearly recognizes that it can’t rest on its laurels.

It is still a private company, which many users believe is the reason why Valve has been more moderate in its' game development throughput, trying out new formulas instead of milking their successful franchises, investing in hardware development and possibly selling the Deck at a loss, and also responded calmly to Epic's entry into their main market (digital game distribution) instead of being pressured by stockholders into securing exclusives, recovering what little user base may have migrated over to the Epic Store and so on.

Answer 7

Discord

Discord doubled its monthly user base to about 140 million in 2020.

Wall Street Journal

Ahead of a funding round in August 2021, Discord had reported $130 million in 2020 revenues, triple from the prior year, and had an estimated valuation of $15 billion.

Financial Times

Both articles are paywalled. Quotes taken from Wikipedia.

A monthly userbase of 140 million (3 years ago) is just under half of Twitter's monthly user base now.

A valuation of $15b (2 years ago) is roughly the same as Expedia Groups market cap and that's currently 384th, by weight, on the S&P 500.

They have taken (a lot of) outside investment but they are still privately owned.