What Is Shares ?

Whether you are a trader or not, it is highly likely that you have encountered the words “stock” or “shares” in the past. They could have come up in the news as the reporters cover the highest-trading stocks or the stocks of the companies that have experienced losses, or you could have simply encountered them as you were binge-watching a big Hollywood blockbuster in which they mention Wall Street and the stock market. Either way, stocks or shares might not be foreign concepts to many people, but did you ever take the moment to think about what they actually mean, how they function, and more?
Stocks are the shares into which ownership of the company is divided. Those who own stocks are called stockholders or shareholders. The ownership of shares entitles stockholders to a fraction of the company's assets and earnings (proportional to the number of shares owned). Stocks are usually traded in stock markets.

Why Do Companies Issue Stocks?

Companies go public and issue stocks in order to raise money to invest in their business and help it grow.

Here are some of the reasons behind why companies might decide to issue shares:

  • * To reduce debt: when companies issue stocks, they are essentially avoiding the risk of handling debt on their own, this is because issuing shares to stakeholders acts as a quick money influx that would cover companies’ debts.
  • * Increase their accessibility to loans: companies that issue stocks can increase their ability to borrow loans in the future. This is because companies that get money from their stakeholders, concurrently decrease their need to ask for loans, thus increasing their chances to get loans in the long run.
  • * To fund expansion: big businesses can sell stocks to generate cash flow in order to fund their business expansion. When a business is attractive to many investors, the chances of it making profitable expansions from its shares are bigger.

Stock Markets

Stocks are usually traded in stock exchanges, which provide a marketplace for buying and selling stocks. Stock exchanges track the supply and demand for the stocks of every corporation, from which the price of the particular shares are derived. These are the largest stock exchanges and their market capitalisation as of December 2021:

  • * New York Stock Exchange - 27.69 trillion U.S. dollars
  • * NASDAQ Stock Exchange - 24.56 trillion U.S. dollars
  • * Shanghai Stock Exchange - 8.15 trillion U.S. dollars
  • * Euronext- 7.33 trillion U.S. dollars
  • * Japan Exchange Group- 6.54 trillion U.S. dollars
  • * Shenzhen Stock Exchange - 6.22 trillion U.S. dollars
  • * Hong Kong Stock Exchange - 5.43 trillion U.S. dollars
  • * London Stock Exchange - 3.8 trillion U.S. dollars

Each exchange has its own list of requirements that corporations must adhere to in order to be listed there. The requirements are usually related to number of shares, market capitalisation and earnings over the past few years.
In order to choose where to list, companies take various factors into account, such as:

  • * Location of the corporation and the exchange.
  • * Type of exchange.
  • * Listing and compliance costs.
  • * Accounting policies to be followed.

The exchange where the stock is listed affects the trading hours of the particular stock. Most exchanges have a fixed schedule with particular opening and closing times, adapted to the local time. Some markets offer pre-market and after-hours trading as well.


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