Today is the first day in the stocks shares and Investments blog. I am going to start from the beginning, so let’s go.
What is a Share/ Stock?
A share is a unit of ownership in a company. When you buy a share you become a part-owner, a shareholder, in the company. Shares are also known as equities or securities. A company whose shares may be bought by the public and traded on the open market is called a quoted Public Limited Company (PLC). Shares and stocks mean the same thing.
Examples are Apple, Facebook, HSBC bank, Sainsbury etc.
When a person buys shares in a company, the individual becomes a part owner of that company, and then certificates are issued.
I will only be talking about ordinary shares however there are other types of shares.
Types of Companies.
Private and Public companies
Private companies – are typically small family businesses that want to keep the control of the business within the family. Not all private companies are small. Donald Trump’s company is a private company. This means he does not raise fund from the public. Also, the public has no access to his books.
Public Limited Liability:
A public limited company (PLC) is also referred to as a publically held company. A company that is publicly held means that the company offers its stock to be purchased by the general public through a stock exchange. A PLC is typically owned by several investors while a private company is normally held by very few shareholders.
This is a type of investment in which an investor cannot lose more than the amount invested. Thus, the investor is not personally responsible for the debts and obligations of the company in the event that these are not fulfilled.
What is a Stock Exchange?
A stock exchange is a form of exchange which provides services for stock brokers and traders to trade stocks, bonds and other securities. Here we have the London Stock Exchange.
Alternative Investment Market is a sub- market of the London Stock Exchange allowing smaller companies to float shares with a more flexible regulatory system than is applicable to the main market. AIM Launched on 1995 and has raised almost £24 billion and has more than 3,000 small – medium – sized companies raise equity to support their growth. Some companies have since moved on to join the Main Market. Many penny stocks Companies are Aim companies. Many Companies start small before they go big, such as Alibaba & Facebook.
Why Companies go Public
Companies go public in order to raise capital for their company and create a market for the companies’ shares; the owners give up a share in the company in return for money to help expand.
How do Companies go Public?
Companies will launch a new issue of shares into the market, this is known as the primary market and it is when the company first offers its shares on the market. Also known as an IPO- Initial public offer or stock market launch. Through this process, a private company transforms into a public company. The service of an Investment banking firm will be required in order evaluate how much the initial share should be.
The next blog on this topic will be Market Indices & Market Capitalisation.
I also offer classes for Stock Shares & Investments for beginners, feel free to get in touch.
Until next time – Keep Believing, Keep Hoping & Keep Loving.