- Stock is ownership in a company.
- Stock is sold in units called shares.
- A person who owns stock is called a stockholder or shareholder.
Stocks are securities that represent ownership in a company. The units that represent ownership are known as shares, the more shares you own as a shareholder, the higher stake you have in the company. The amount of outstanding shares in a company is determined when a company files for their Initial Public Offering (IPO). Companies are typically divided into millions, tens of millions, or even billions of shares. For example, Facebook (FB) is divided up into 2.35 billion shares. The number of shares can change over time due to stock splits or an additional public offering.
If you want to figure out how much of a company you own, divide the number of shares you own by the total number of shares. If you owned 23.5 million shares, you’d own 1% of Facebook. Mark Zuckerberg owns 471 million shares, which is about 20% of the company. Not too shabby.
Companies raise money by issuing stock to the public for various reasons. Typically it is to use the cash received to expand their business or pressure from the initial pre-IPO investors so that they can take their profits.
You can always check out our Beginner's Guide here for more information to help you out as you begin your investment journey!