A share is a security that secures a stake in a company. By acquiring a share, the owner has certain rights of participation in the issuing company, the stock corporation. The stock corporations issue shares in order to obtain capital for financing.
In Germany, many companies choose the legal form of a stock corporation (AG), since they can thus easily obtain capital through the issuance of shares. If the company meets certain conditions, the company can be listed on the stock exchange. The company may then issue shares which may be acquired by institutional or private investors. By issuing shares, the company receives equity that it needs to finance. The owner of a share is therefore not a creditor, such as a bank, which provides the company with a loan, but co-owner of the company. As a share of the company increases, the owner’s right of participation increases. If a stock buyer purchases more than 50% of the shares of a company, the owner also holds more than 50% of the voting rights. He would thus be able to exert a dominant influence on the company. The development of certain share prices is reflected in a stock index. For example, the German stock market is dominated by the DAX index, the American Dow Jones and the Japanese Nikkei Index. Other known indices are, for example, the STOXX, MDAX and NASDAQ. For such stock indices, there is a separate investment form, the so-called index funds.
Shares may be subdivided into bearer shares or registered shares. In the case of registered shares, the owner of the shares is entered into the share register of a stock corporation by name, date of birth and address. Actual shares are therefore not anonymous but personalized. The company therefore knows the owner of a registered share. Ownership shares are different. Here, too, there is an owner, but this is only referred to as owner in the company’s share register. From the company’s point of view, the owners of bearer shares are anonymous investors. As a result, it is also unproblematic when owner shares are sold or traded. If a bearer share changes the owner, no change in the share register is required.
In addition, shares may be distinguished according to the extent of the rights securitized. A distinction must be made between ordinary shares and preference shares. Common shares are shares which grant the shareholder the statutory and statutory rights. On the other hand, preference shares are shares which give additional rights. Here, for example, the payment of a minimum dividend in economically worse times is considered. Preference shares are thus more advantageous to the shareholder.
A third type of structure for shares is the subdivision into nominal shares and quotas. For share shares, the share is not allocated to a fixed cash amount, but a share of the company’s equity, for example a share of 1 to 10,000 (corresponds to 0.01%). On the other hand, there is a nominal value for nominal shares, which is calculated by dividing the share capital and the number of shares issued.
Companies wishing to issue shares are often listed in the legal form of the company. They are governed by the provisions of the German Stock Corporation Act (AktG). However, shares may be issued in Germany by a limited partnership. Which company form is more advantageous for the company is to be decided on a case by case basis. By issuing shares, companies must grant certain rights to the shareholders. This includes, among other things, a shareholding in the balance sheet, a right of information, a right to attend the Annual General Meeting and a right to vote.
When issuing shares, the company has to set a minimum value of one euro according to the provisions of the German Stock Corporation Act (see § 8 AktG). In addition, shares may not be shared. However, it is possible to issue additional shares. In the capital markets, a further capitalization of the company is then discussed.
THE IMPORTANCE OF SHARE
For companies, stocks are essential. By spending it, they can receive additional capital, which they can use for investments, among other things, which in turn promotes the growth of the company.
Institutional or private investors are increasingly gaining in importance. While stocks in earlier times were merely considered as speculative investment, they are now regarded as an alternative investment. Particularly in times of low interest rates, stocks are enjoying growing popularity. Investors can earn money by investing in shares in two different ways. On the one hand, investors participate in the company’s profits by paying a dividend, and on the other hand, investors can benefit from increases in value through the trading of shares. The latter reason, however, also carries risks because it is not unusual for stocks to lose value and thus lead to a lower selling price.