Many of you must have heard and read about shares in news, social media, or by your friends. When we hear or see about share and its index on television, newspaper, or social media, then one thing definitely comes to our mind that it is related to the share market. Since the issuance of shares of Nepal Infrastructure Bank (NIFRA), there has been found massive awareness regarding shares in every category. But have you ever thought about:

 

  • What is a share?
  • When does any company issue shares?
  • What are the benefits of issuing shares to any company?

 

There are some such questions, which may have come to your mind as well. In today’s article, we are going to give you information about What is a share? 

 


 What is a share? 

Share means the value of capital or an equity part. Whenever you have bought shares of a company from the share market, it means that you partially buy your stake in that company. That is, you buy a share and owns some equity in that company. When you buy shares of that company, you become a shareholder or equity holder of that company. The share or stake you buy in the stock exchange is also called equity.

 

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The shares issued by any company are traded in the following ways: 

The first company issues IPO (Initial Public Offering). It is through IPO that a company brings its shares to the stock market for the first time. So that the public can buy these shares.

 

Another way is to buy and sell shares of the company which is listed on the Stock Exchange (NEPSE). Here are two ways with the help of which anyone can buy the share i.e. Primary market through IPO & Secondary market (NEPSE) through a broker. But in the secondary market, we can also sell the shares.

 

The stock exchange is also called a secondary market. Currently, there is only one stock exchange in Nepal i.e., Nepal Stock Exchange (NEPSE). But the Securities Board of Nepal (SEBON) is planning to introduce a new Stock Exchange for small and medium scale companies.


Why does any company issue share? – Why do companies issue shares?

 

These are the some frequently asked question for every new investor/trader. Every company wants you to grow its business. The company needs a lot of money to grow its business. A lot of capital is needed to grow the business. In such a situation, companies issue shares to raise money from the general public.

The company prepares the corporate structure to expand its business. For this, through IPO in the stock exchange, its shares are brought to the public. So that investors buy their stake on those shares in large numbers. Any company gets its shares listed in the stock market through IPO.

It is easy for the investor to buy the shares of any listed company. Investors also have the right to the dividend, bonus shares, and rights shares declared by the company.

  

How many types of shares are there in the stock market? – Type of Share in Stock Market

There are two types of shares in the stock market:-

  • Equity Share
  • Preference Share

 

 We will learn below about what are equity shares and preference shares in detail: –

 

What is Equity Share?

An equity share is any shareholder or investor who can buy and sell shares from the primary market and secondary market. An equity shareholder those who hold ownership rights on the company in proportion to the number of equity shareholder shares of any company. 

He also has the right to vote in the affairs of the company. When we talk about shares or equity shares then it also comes to our mind that dividend. But there is no guarantee of dividend on these shares.

 

The company pays dividends on equity shares only after clearing the dues of all the creditors and preference shareholders. In case of loss of the company, the shareholder does not get any dividend or anything, and on the contrary, in the case of profit to the company, these shareholders get the most profit.

 

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What is Preference Share?

This is another type of share, in which the shareholders do not have voting rights like equity shareholders. The price of these shares is less than the current price of the equity share. 

The rate of dividend is fixed on these shares. If the company is wound up for any reason, the first right is given to the preference shareholders, and they are paid dividends and principal before the equity shareholders. 

The shareholder gets his first dividend at the rate of dividend. In this, whether the company is in profit or loss.

  

Benefits of investing in the share market (NEPSE):

Investing in shares can be beneficial in many ways which we have listed below:-

  • Dividend Benefit:- If the company has profit, then it pays some part of the profit to its shareholders as dividend. The benefit of which is given to each investor on the amount invested by him.

 

  • Bonus benefits: – The company gives additional shares as a bonus to its investors from time to time. The benefit of which is available to all the shareholders. It is also known as bonus shares.


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  •  Benefit of Right Issue: – The company issues rights share to its shareholders. The profit of which is given to every shareholder in proportion to their share.

 

  • Benefit from the increase in share price: – If a company performs well, then its share prices also increase. Due to which the money invested by the investors also increases. Similarly; the principal amount of the investor also increases. If the share price increases and it makes a profit then shareholders can also sell their shares in the stock market at a good price.