Stock
This typically entitles the shareholder (stockholder) to that fraction of the company's earnings, proceeds from liquidation of assets (after discharge of all senior claims such as secured and unsecured debt),[3] or voting power, often dividing these up in proportion to the number of like shares each stockholder owns.
Transactions of the former are closely overseen by governments and regulatory bodies to prevent fraud, protect investors, and benefit the larger economy.
As new shares are issued by a company, the ownership and rights of existing shareholders are diluted in return for cash to sustain or grow the business.
In the United Kingdom, Republic of Ireland, South Africa, and Australia, stock can also refer, less commonly, to all kinds of marketable securities.
As a unit of ownership, common stock typically carries voting rights that can be exercised in corporate decisions.
These individuals will only be allowed to liquidate their securities after meeting the specific conditions set forth by SEC Rule 144.
Rule 144 allows public re-sale of restricted securities if a number of different conditions are met.
The Roman orator Cicero speaks of partes illo tempore carissimae, which means "shares that had a very high price at that time".
[14] In 1288, the Bishop of Västerås acquired a 12.5% interest in Great Copper Mountain (Stora Kopparberget in Swedish) which contained the Falun Mine.
The Swedish mining and forestry products company Stora has documented a stock transfer, in 1288 in exchange for an estate.
It was granted an English Royal Charter by Elizabeth I on 31 December 1600, with the intention of favouring trade privileges in India.
[16] Soon afterwards, in 1602,[17] the Dutch East India Company issued the first shares that were made tradeable on the Amsterdam Stock Exchange.
They can achieve these goals by selling shares in the company to the general public, through a sale on a stock exchange.
In the common case of a publicly traded corporation, where there may be thousands of shareholders, it is impractical to have all of them making the daily decisions required to run a company.
Alternatively, debt financing (for example issuing bonds) can be done to avoid giving up shares of ownership of the company.
In general, the shares of a company may be transferred from shareholders to other parties by sale or other mechanisms, unless prohibited.
Most jurisdictions have established laws and regulations governing such transfers, particularly if the issuer is a publicly traded entity.
Today, stock traders are usually represented by a stockbroker who buys and sells shares of a wide range of companies on such exchanges.
Likewise, many large U.S. companies list their shares at foreign exchanges to raise capital abroad.
Shares of companies in bankruptcy proceedings are usually listed by these quotation services after the stock is delisted from an exchange.
Brokerage firms, whether they are a full-service or discount broker, arrange the transfer of stock from a seller to a buyer.
He can sell if the share price drops below the margin requirement, at least 50% of the value of the stocks in the account.
This fee can be high or low depending on which type of brokerage, full service or discount, handles the transaction.
Importantly, on selling the stock, in jurisdictions that have them, capital gains taxes will have to be paid on the additional proceeds, if any, that are in excess of the cost basis.
Stocks can also fluctuate greatly due to pump and dump scams (also see List of S&P 600 companies).
The supply, commonly referred to as the float, is the number of shares offered for sale at any one moment.
According to behavioral finance, humans often make irrational decisions—particularly, related to the buying and selling of securities—based upon fears and misperceptions of outcomes.
The "greater fool theory" holds that, because the predominant method of realizing returns in equity is from the sale to another investor, one should select securities that they believe that someone else will value at a higher level at some point in the future, without regard to the basis for that other party's willingness to pay a higher price.Thus, even a rational investor may bank on others' irrationality.
A keen investor with access to information about such discrepancies may invest in expectation of their eventual convergence, known as arbitrage trading.
Electronic trading has resulted in extensive price transparency (efficient-market hypothesis) and these discrepancies, if they exist, are short-lived and quickly equilibrated.
