Shares are a certificate or document that represents fractional ownership in a company. The holder of shares is called a shareholder. A company can issue different types of shares, which have different rights and privileges.
There are two main types of shares:
common shares and preferred shares. Common shares give the shareholder voting rights, while preferred shares typically do not. However, preferred shares usually have preference over common shares in the event of a liquidation.
Different classes of shares can also be issued, which may have different rights and privileges. For example, a company might issue Class A shares to insiders that have voting rights, while issuing Class B shares to the general public that do not have voting rights.
The number of shares, a shareholder owns is known as their stake in the company. The more shares someone owns, the greater their stake. shares can be bought and sold on stock exchanges, and the price of shares is determined by supply and demand.
When a company first goes public, it will issue an initial public offering (IPO) of shares. This is when the company sells shares to the public for the first time and raises money to grow its business.
They are an important part of a company’s capital structure and can be used to raise money for expansion or to pay off debts. They can also be used as a form of compensation for employees.