financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial marke ...

, a share (sometimes referred to as

stock Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the Share (finance), shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporatio ...

or equity) is a unit of equity ownership in the

capital stock In economics, capital goods or capital are "those durable produced goods that are in turn used as productive inputs for further production" of goods and services. A typical example is the machinery used in a factory. At the macroeconomic level, ...

of a corporation. It can refer to units of

mutual fund A mutual fund is an investment fund that pools money from many investors to purchase Security (finance), securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in ...

limited partnership A limited partnership (LP) is a type of partnership with general partners, who have a right to manage the business, and limited partners, who have no right to manage the business but have only limited liability for its debts. Limited partnership ...

s, and

real estate investment trust A real estate investment trust (REIT, pronounced "reet") is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of real estate, including office and apartment buildings, studios, warehouses, hos ...

Share capital A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's equity that has been derived by the issue of shares in the corporation to a shareholder, usually for cash. ''Share ...

refers to all of the shares of an enterprise. The owner of shares in a company is a

shareholder A shareholder (in the United States often referred to as stockholder) of corporate stock refers to an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the ...

(or stockholder) of the

corporation A corporation or body corporate is an individual or a group of people, such as an association or company, that has been authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law as ...

. A share expresses the ownership relationship between the company and the shareholder. The denominated value of a share is its face value, and the total of the face value of issued shares represent the

capital Capital and its variations may refer to: Common uses * Capital city, a municipality of primary status ** Capital region, a metropolitan region containing the capital ** List of national capitals * Capital letter, an upper-case letter Econom ...

of a company, which may not reflect the market value of those shares. The income received from the ownership of shares is a

dividend A dividend is a distribution of profits by a corporation to its shareholders, after which the stock exchange decreases the price of the stock by the dividend to remove volatility. The market has no control over the stock price on open on the ex ...

. There are different types of shares such as equity shares, preference shares, deferred shares, redeemable shares, bonus shares, right shares, and employee stock option plan shares.

Terminology

Stock Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the Share (finance), shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporatio ...

* Equity *

Shares outstanding Shares outstanding are all the shares of a corporation that have been authorized, issued and purchased by investors and are held by them. They are distinguished from treasury shares, which are shares held by the corporation itself, thus representi ...

are shares that are authorized by the government, issued by the company, and held by third parties. *

Treasury share A treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market ("open market" including insiders' holdings). Stock repurchases are used as a tax efficien ...

s are shares that are authorized, issued, and held by the company itself. *

Issued shares In economics and law, issued shares are the shares of a corporation which have been allocated (allotted) and are subsequently held by shareholders. The act of creating new issued shares is called ''issuance''. Allotment is simply the transfer of s ...

are the sum of shares outstanding and treasury shares. *

Shares authorized The authorised capital of a company sometimes referred to as the authorised share capital, registered capital or nominal capital, (particularly in the United States) is the maximum amount of share capital that the company is authorised by its c ...

include both issued (by the board of directors or shareholders) and unissued but authorized by the company's

constitutional documents In relation to juristic persons, the constitutional documents (sometimes referred to as the charter documents) are the documents which define the existence of an entity and regulate the structure and control of that entity and its members. The pr ...

Valuation

Shares are valued according to the various principles in different

market Market is a term used to describe concepts such as: *Market (economics), system in which parties engage in transactions according to supply and demand *Market economy *Marketplace, a physical marketplace or public market *Marketing, the act of sat ...

s, but a basic premise is that a share is worth the price at which a transaction would be likely to occur were the shares to be sold. The

liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quic ...

of markets is a major consideration as to whether a share is able to be sold at any given time. An actual sale transaction of shares between buyer and seller is usually considered to provide the best prima facie market indicator as to the "true value" of shares at that particular time. A

minority discount Minority discount is an economic concept reflecting the notion that a partial ownership interest may be worth less than its proportional share of the total business. The concept applies to equities with voting power because the size of voting positi ...

is usually applied when valuing a minority shareholding (less than 50%), where ownership of the shares offers limited control over the business if this is held by a majority shareholder.

Tax treatment

Tax treatment of dividends varies between tax jurisdictions. For instance, in

India India, officially the Republic of India, is a country in South Asia. It is the List of countries and dependencies by area, seventh-largest country by area; the List of countries by population (United Nations), most populous country since ...

, dividends are

tax A tax is a mandatory financial charge or levy imposed on an individual or legal entity by a governmental organization to support government spending and public expenditures collectively or to regulate and reduce negative externalities. Tax co ...

free in the hands of the shareholder up to INR 1 million, but the company paying the dividend has to pay dividend distribution tax at 12.5%. There is also the concept of a deemed

, which is not tax free. Further, Indian tax laws include provisions to stop

dividend stripping Dividend stripping is the practice of buying shares a short period before a dividend is declared, called cum-dividend, and then selling them when they go ex-dividend, when the previous owner is entitled to the dividend. On the day the company trade ...

Share certificates

Historically, investors were given

share certificate In corporate law, a stock certificate (also known as certificate of stock or share certificate) is a legal document that certifies the legal interest (a bundle of several legal rights) of ownership of a specific number of shares (or, under Ar ...

s as evidence of their ownership of shares. In modern times, certificates are not always given and ownership may be recorded electronically by a system such as CREST or DTCC, a

central securities depository A central securities depository (CSD) is a specialized financial market infrastructure organization holding securities such as shares or bonds, either in certificated or uncertificated ( dematerialized) form, allowing ownership to be easily tra ...

Tracing shares

As of May 2022, the

United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that turn on question ...

was considering the case of '' Slack Technologies, LLC v. Pirani'', No. 22-200, 598 U.S. ___ (2023), with regard to whether Sections 11 and 12(a)(2) of the

Securities Act of 1933 The Securities Act of 1933, also known as the 1933 Act, the Securities Act, the Truth in Securities Act, the Federal Securities Act, and the '33 Act, was enacted by the United States Congress on May 27, 1933, during the Great Depression and afte ...

require plaintiffs to plead and prove that they acquired shares of stock registered under and traceable to the

registration statement In the United States, a registration statement is a set of documents, including a prospectus, which a company must file with the U.S. Securities and Exchange Commission before it proceeds with a public offering. As of May 2022, the United States ...

they claim was misleading.

References

External links

* * {{Authority control Equity securities Stock market