What exactly is a share?

A share is a share in a company, the so-called stock corporation (AG). When you buy a share you become a co-owner of the company. The owners of the shares are called shareholders.
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TransparentShare - What exactly is a share?

Why does a company offer shares for purchase and thus also company shares?

Company XY AG wants to expand and needs 10 million capital for this. Unfortunately, XY AG does not have equity of 10 million, so it has to finance the amount required for the investment. There are two ways to do this:

  1. She can take out a loan from a bank and has to pay interest accordingly.

  2. It can issue shares and thus increase its equity.

Companies are almost always financed by equity and debt.

The issued shares can now be bought from a certain deadline via banks or online brokers.

The newly issued shares (also called new shares issued) can then either be bought by existing shareholders or by new shareholders.

The rights of shareholders

With the purchase of shares you automatically receive different shareholder rights, which are regulated in the Stock Corporation Act. These are divided into administrative rights and property rights.

The Administrative rights are there to represent and enforce the interests of shareholders. In most cases, you will receive one voting right per share that you can exercise at the AG's annual general meeting. An AG is obliged to call a general meeting every year. All shareholders are invited to this because important decisions, such as the election of the supervisory board, are voted on there.

The Property law, includes the right of the shareholder to participate in the profits of the company, a participation in the liquidation proceeds if the AG has to be liquidated and the right to buy new shares if, as in our example, new shares are issued.

To let their shareholders share in the company's profits, many companies pay out a dividend once a year. If you are a shareholder, this dividend is automatically transferred from the corporation to your deposit account.

How do you make money with stocks?

Besides the dividend but shareholders can also get through Price gains make money with stocks. Since shares are traded on the stock exchange, their price depends on the demand of buyers and the offer of sellers. If there is a lot of demand because many people think that the company is worth more than its current market value, the share price rises. However, if there are more interested sellers than buyers, the price will continue to fall until enough buyers are found to take their shares from the sellers. Of course, the latest news about a company or the entire industry also influence people's buying / selling behavior.

This video will also help you better understand what stocks are exactly.


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