Share versus stock
- Suppose the company has issued 1000 shares, worth Rs.10 each
- You purchased 50 shares of this company. So you have to pay 50 shares x 10 Rs. Each = Rs.500
- That means you own “50 Shares” of this company and
- You own “stock of Rs.500” in this company.
- In short, when we talk about shares we refer to the number of papers held by you.
- When we talk about stocks, we refer to the money value of those papers held by you.
- But ultimately, both shares and stocks suggest the same thing: “Equity”.
Different types of shares
- Normal shares
- It comes with voting rights. This is what you get from routine IPO>>Share thing
- Preferential shares
- Already discussed in the SBI capital infusion article
Still There are some topics related to shares
Rights issue of shares
launch IPO, get funds from the public, and start a company. (Equity)
- After some years you want some more money to expand the company, so you want to issue additional shares. But under the companies act, you can issue additional shares to the existing shareholders only. This is called “rights issue of shares ”
- Here, you give notice to the existing shareholders, offer them to buy your new-shares, you cannot offer any other “outsider” to purchase the shares.
- If you do not want “rights issue of shares”, you have to hold a general meeting of shareholders and pass a resolution that “company does not need to offer new shares to the existing shareholders, and these new shares are available for anybody to purchase ”
Rights issue of Shares?
Well the direct utility of rights issue= obviously to gather more money to expand your company. ut it is also used for other purpose as well, such as: