Public companies, private companies, and the insider-trading tripwire

Where the worlds split

Private companies run on profit, reserves, and choice.
Owners can grow when growth makes sense. They can slow down to strengthen operations. They can keep strategy quiet.

Public companies run on price, narrative, and compliance.
Share price becomes a scoreboard. Quarterly expectations become a drumbeat. Disclosure rules shape language and timing.

Public markets also reshape the psychology of wealth. Private ownership can feel sticky. Founders often hold tight until they sell the whole business.

Public shares feel liquid. A person can sell part of a position and still stay “in.” The remaining shares can even rise if demand grows. That can feel upside down, and it can pull leaders toward managing the market rather than building the business.

The hidden tax of public life: silence, choreography, and fear

Public-company leadership demands controlled speech.

A friendly sentence can move money. When money moves, regulators and litigators start hunting for cause and effect.

That “tax” often looks like:

• blackout windows and trade pre-clearance for insiders

• scripted disclosure calendars

• investor relations discipline

• constant awareness that “helpful” talk can ruin lives

Entrepreneurs often talk big. They exaggerate. They sell the dream. That habit can work in private commerce. In public markets, that habit can cross a line even when no one aims to cheat.

Three real examples.

Example 1: “Shadow trading” shows how far the rules can reach

Regulators brought a case against Matthew Panuwat using a theory often called “shadow trading.” The allegation described this pattern: he learned material nonpublic information about his employer’s pending acquisition, then bought options in a different public biotech that regulators viewed as a close comparable. A jury later found him liable.

What to learn from it
Insider trading risk can extend beyond “our own stock.” If information about Company A can predictably move Company B, trading Company B can still trigger enforcement.

If the company had stayed private
Private ownership would not protect someone who trades public securities based on inside knowledge learned at a private firm. The trade still happens in public markets. Private status tends to reduce some liquidity temptations, not the rules.

Example 2: The classic breach scenario

Enforcement tied to the Equifax breach illustrates a familiar pattern. Authorities alleged a senior executive traded before the breach disclosure became public. The matter produced charges and later sentencing outcomes.

What to learn from it
A market-moving event plus personal trading creates a clean, time-stamped story. Surveillance systems love clean stories.

If the company had stayed private
No open market would exist for fast selling. That removes the simplest pathway. Yet deception still creates exposure. A private executive who sells private shares, negotiates a buyout, or exits while hiding material facts can still face serious consequences through fraud claims, fiduciary-duty claims, and sometimes securities-law exposure depending on structure.

Private ownership slows monetisation. Private ownership does not clean the behaviour.

Example 3: Tip networks scale because markets scale

The Raj Rajaratnam era showed what happens when inside information turns into a networked product. Enforcement produced major penalties and became a symbol of how far a tip chain can spread.

What to learn from it
Public markets offer two gifts to the wrong person. Liquidity, and scale. A whisper can become millions when a trader can move fast across large positions.

If the companies had stayed private
Monetising tips quickly becomes harder because private shares trade less often and require counterparties and paperwork. Yet the underlying hazard remains. Inside knowledge can still distort private deals, and legal exposure can still arise, even if detection feels less automatic.

Private businesses vs family businesses.

A family business sits inside private ownership, yet it carries its own risk profile.

Common advantages

• long-term thinking

• loyalty and continuity

• patience around investment

Common disadvantages

• blurred boundaries between family roles and business roles

• reluctant accountability because conflict feels personal

• succession problems, especially when heirs want different lives

• “employment as love,” where family members get roles they have not earned

• difficulty attracting strong outside talent, because outsiders can feel like guests, not leaders

A normal private business can fire someone cleanly. A family business often negotiates with blood ties. That can create stability. That can also create a slow leak of competence.