An action is a title issued by a capital company (e.g. a corporation or a company limited by shares). It gives the holder the ownership of part of the capital, with the rights associated: intervene in the management of the company and income called dividend.
Actions allow to take part directly in the life of a business: you enjoy good health and its difficulties. When they are publicly traded, the shares are one of the easiest to buy and sell instruments. But keep in mind that the value of a share may go down to zero if the company goes bankrupt. It's not to big to fail companies.
The holder of shares is referred to as shareholder and shareholders make up the ownership. Action is also classified among securities (what a surprise lol).
- 1 The preferred shares
- 2 It isn't just action and shares
- 3 Who can create to-DOS?
- 4 The rights attaching to the shares
- 5 Hold shares, is – this risky?
- 6 Limited liability
- 7 Or buy stocks?
- 8 The price of a stock
- 9 The dividend
- 10 To go further:
- 11 Conclusion:
There are also specific actions is called a preferred shares. Shares of preference are governed by article L. 228 – 11 and the following of the Commercial Code.
Actions can preferably be issued in all types of societies by shares (listed or not). The preference may be capital intensive (special dividend, often very interesting) or political (right to vote or information strengthened), it can be positive (reinforcement of a right) or negative (limitation or suppression of a right), without that there must be a balance between the advantages and disadvantages.
When a title has more than one category, these categories are traditionally designated class A and class b Berkshire Hathaway (ticker: BRK), the company of Warren Buffett (one of the greatest investors of all time and my favorite), has two classes of shares.
Action at priority dividend (ADP)
Since 1978 the companies have the possibility of issuing of ADP. It is actions which the right to vote is seconded, in other words no, but including the dividend is a priority, that is, the payment is made in priority to the common shares. The rights being lower with this type of action, so it is better paid. Furthermore the minimum amount of the dividend must be at least 7.5 per cent of the nominal value of the share.
In case the dividend could be paid in full because of insufficient profits, the balance would be carried over the following two years. And finally if the situation lasted over three years the right to vote would be reinstated and ADP would go back to an ordinary action.
do not confuse stock and shares.
The main difference is their mode of transmission which is simplified for the shares due to the speed of business requirements. Thus the capital of a LLC (limited liability company) is composed of shares and no actions, is similarly of the mutual fund (FCP).
Who can create to-DOS?
In France the law assigns the quality of shares to securities that make up the capital:
- Anonymous companies (SA), a company is said to be anonymous, because shareholders succeed one another without necessarily knowing; the importance is thus attached to capital rather than people
- Simplified corporations (SAS)
- Companies limited by shares (SCA)
- The SICAV (investment companies with variable capital), mutual funds that are limited liability companies
Since order No. 2008-1 of January 22, 2009, the term of appeal public savings disappeared in favour of the European appellation 'Offer to the Public of securities financial', eliminating the french plan, which was poorly understood abroad.
Removal of the threshold of minimum capital of 225 000 euros for companies publicly traded savings
The obligation to have a share capital of 225 000 euros, at least if the company publicly appealed to the savings is eliminated. Article L.224 – 2 of the commercial code modified precise that the minimum threshold of the capital stock of corporations (except the SAS) is fixed to 37,000 euros, even in the case of public supply or if the securities of the company are registered in the negotiations on a regulated market. We rarely anyway securities with a weak capital.
Common shares this time confer on their owners various types of rights:
Political rights (all extra economic rights): right to information and right to vote.
The financial rights: right to dividends right to reserve right to the surplus upon liquidation.
Economic rights: actions are tangible assets (of the VMP), a good part of the shareholder. Subsequently, the general pledge of the creditors right allows them to seize them; the shareholder may also assign them or even get a credit in guarantees them; they can also be the subject of a loan (for fungible goods, the transfer of possession leads the dispossession of the good).
To hold and manage stocks on-line, an account opening titles is necessary.
By nature, hold shares is a risky investment. You bet on the potential of capital gains related to the evolution of the share price and the perspective to realize added value upon resale of the shares. You can also bet on the performance of action or the net asset value of the company. Unfortunately it is possible to lose all or part of his investment especially if investor:
sold his shares at a loss, it is a capital loss and loses a part of its initial (for example, a shareholder who buys an action X over 10 euros to resell 2 years later during 7 euros, realizes a loss of 3 euros);
If the company goes bankrupt, it may lose all of its investment.
But even in the worst case, the shareholder cannot lose more than the amount initially invested. So happens someplace you can't lose more than your bet.
The advantage of investing in stocks is the liability limited to the amount of action.
Or buy stocks?
The stock exchange is a place of listing (i.e.). In France, the rating the more known, where the majority of the transactions is NYSE Euronext Paris (traditionally called the Paris stock exchange). On NYSE Euronext Paris shares are integrated and compartmentalized according to different markets:
-Regulated markets (compartment A, B, C, based on the market capitalization of the action). It includes the CAC 40, the midle etc
-Non-regulated markets (free market)
I invite you to read article Typologies of markets
Moreover, the mode of trading stocks is mainly via the stock exchange but in some cases it may be OTC OTC (over-the-counter).
Purchase and sales on the french market orders are centralized on the computer system of the stock exchange. FYI the ACC is abbreviation of rating assisted continuous. The values (or actions) the most liquid and active (i.e. which are the most traded, and for which it is not shortages of supply and demand), are rated uninterrupted, continuous. Other values are exchanged once or twice a day scheduled, there are therefore two fixing(moment d´échange) in the day at 11:30 and 16:30 (1 fixing at 3 pm for the free market)
-Continuous rating: French stocks are traded continuously from 9: 00 to 17: 00. There are large groups known as farm credit, danone…
The price of a stock
An action which is listed on the stock exchange will see its course, in other words its price fluctuate daily. The course of action depends on different elements specific to the company and also outside.
The company's results will play on its course, but also forecast profit for the future, of his situation and the economic sector to which is attached the company.
Trust in the company and finally general economic conditions will have an impact in the price.
The price of the share on the market will be determined based on supply and demand.
Supply and demand will also intervene.
And many other factors like the weather (Yes it is proven).
Most or loss
An action can be sold on the stock exchange at any time. This sale may release a more or loss. When the action is sold more expensive than buying, the shareholder wins money by making a profit, he realizes a taxed capital gain (see dedicated article). When the action is sold cheaper than buying, a loss is recognized, an impairment loss is so cleared.
The dividend is the portion of net profit of the company distributed to the shareholder. The shareholder will receive a revenue associated with its action. The distribution of this income so provide the shareholder a return on his investment.
Example: Action has that rating 10 euros distributes a dividend of 10 euros per share. The performance is 10%.
Often the shareholders are very interested in what we call the PER or price earnings ration or ratio course on profits.
To go further:
In parallel to the actions exist securities say compound or hybrid related actions:
the warrants: bonds with equity warrants
the ABSA: actions with stock warrants
Warrants: warrants (of shares) autonomous
the OCA: convertible bonds
the ORA: callable bonds into shares
There are so many things to say about the actions that this article cannot be one introduction. I invite you therefore to deepen a bit more.