In the context of private equity, "private" refers to the nature of the companies in which investments are made. The companies targeted by private equity firms for investment are not typically publicly traded on stock exchanges (meaning their shares are not available for purchase by the general public). 

Investments in private companies

Instead, private equity firms usually invest in privately held companies. Majority investments in private companies can allow private equity firms to get more heavily involved in the management and strategic direction of the business (in contrast, investors in public companies rarely have a board seat or the ability to strongly influence commercial decisions). Investing in private companies also enables private equity firms to operate outside the regulatory requirements of public markets, meaning they will be subject to less public scrutiny and fewer disclosure and reporting requirements (they typically need to report to only a handful of shareholders, rather than hundreds or thousands).  

Investments in public investments

This isn’t always the case however. Where opportunities exist for significant operational improvement or strategic transformation, private equity firms may sometimes invest in public companies, typically with the intention of then removing the public company’s shares from the relevant stock exchange (this is known as “taking the company private”). Or they may (very occasionally) buy minority stakes in public companies that they think have growth potential. 

Moreover, when a private equity firm “exits” an investment - i.e. sells most or all of the shares in a portfolio company - by listing a portfolio company’s shares on a stock exchange to sell those shares to the general public, the firm may end up owning some of those shares after the listing. Such listings are known as initial public offerings, or “IPOs”. Post-IPO, private equity firms tend to retain shares for a set period (usually 90 to 180 days) to prevent a sudden sale affecting the stock price right after the IPO takes place. This is known as a “lock-up period”. However, some firms may choose to hold shares for a longer period after an IPO, while others may fully divest their shareholding from the get-go.

Are private equity firms ever public companies?

Private equity firms themselves are rarely listed on stock markets; they prefer to remain private to maintain flexibility in their investment strategies and avoid the regulatory requirements and scrutiny that come with being publicly traded.  

However, there have been instances of them going public through IPOs or other means. For example, in 2007, Blackstone raised $4 billion via an IPO, in order to raise money to invest in new businesses, among other purposes. More recently, in 2024, CVC Capital Partners listed its shares on the Amsterdam stock exchange, in part to help grow its assets under management. Note however that PE firm IPOs are less common compared to other types of financial firms such as hedge funds and asset managers.