Taken Private

QI read that Tesla might be “taken private.” What does that mean? — F.L., Columbia, Missouri

ACompanies often start out privately owned by their founders. If they grow and prosper, they may “go public” via an initial public offering (IPO), selling a chunk of themselves in shares on the stock market. Companies can go in the opposite direction, too, becoming private again, if their shares are bought back and no longer trade publicly.

A high-profile example of a company being taken private is Dell. Founder Michael Dell, in partnership with a private equity firm, took his struggling computer company private in 2013. Now it looks like Dell will go public again.

QDoes a low stock price mean a company is small, and vice versa? — H.T., La Crosse, Wisconsin

ANot at all. The stock price alone doesn’t tell you much until you relate it to other numbers. To get at a company’s market value, multiply its stock price by its number of shares. You have to factor in the number of shares to get an idea of a company’s size.

If Keyboard Depot (ticker: QWERTY) had a stock price of $100, for example, and 10 million shares outstanding, its market price (“market capitalization,” or “market cap,” as they say on Wall Street) would be $1 billion. (Size can also be measured by other factors, such as revenue or number of employees.)

Consider that Cheesecake Factory, Starbucks and Verizon Communications were all recently trading for around $54 to $55 per share, but their market caps were, respectively, around $2 billion, $74 billion and $226 billion. Meanwhile, the WD-40 Company recently sported a share price near $188 but a market cap of $2.5 billion.