- Personal Finance»
- Understanding Finance
Shares represent a part of a company. Owners of shares essencially own a portion of the company that issued those shares to the portion that those shares owned by the specific share holder compare to the total amount of shares.
There are 8 main types of shares:
- Ordinary shares are the most common share and to not provided any special right. Each ordinary share represent 1 vote, and dividend payment order that does not have a priority,
- Voting preference shares give the owner of this type of share a voting right that is set during the issueing of them,
- Dividend preference shares holders receive dividends before any other type of share holders do,
- Employee stocks are given only to present or past employees of the company. Employee stocks usually, although not necessarily, ordinary shares in function,
- Interest bearing stocks give interest that is set upon the issuing of these shares,
- Own stocks are usually, but again, not exclusively, are ordinary shares that are own by the very same company as that one that issued them. Companies buy their own shares for many reasons, for example, saving tax (usually buying own shares are not taxed as heaviliy as paying dividend), company managers think that the stocks are currently undervalued, so they are a good investment, or own share are bought to fund later mergers and acquisitions (two merging companies exchange their share in form of swap transactions),
Purchase preference securities (usually bonds) enable their holders to buy shares at a discounted price, or in case of an IPO, before anybody else. Again the number, and price at which those shares can be bought are set upon issuing of those securities. Usually ordinary shares can be purchased with purchase preference securities.
- Convertible securities (usually bonds) can be converted to stock at a preset rate and after a preset time period,