Public markets are what is conventionally thought of when the term ‘financial markets’ is mentioned. Securities – meaning financial assets like stocks or bonds – can be viewed and traded by ordinary retail investors in public markets, as well as by institutional and wholesale investors.
In private markets, a business can still receive investment, but through fields such as private equity or private credit. Ordinary retail investors are unable to invest in private markets, with investors here usually being wealthy institutional investors such as venture capital firms, private equity firms, sovereign wealth funds and ultra-high-net-worth individuals.
Public and private, in practise
It’s easier to understand public and private markets if we view them in terms of an individual business. A new business, by default, won’t be listed in public markets, such as stock markets. Instead, it will exist in private markets.
While the business can still attract investment from investors that operate in private markets, it might seek to raise money from a larger pool of retail investors who are unable to invest through private markets. It could do this through entering the public stock market with an initial price offering (IPO). An IPO is the process through which a business offers its shares to the general investing public for the first time.
Once a business is listed on public stock markets – or chooses to issue bonds, which can be traded in public bond markets – retail investors are able to trade its securities.