What Is an Ordinary Share?
An Ordinary Share is a type of stock found in the share capital structure of a corporation that entitles its holders to enjoy a slice of the profits (dividends) the company generates, theoretically, to infinity and beyond. Unlike their more stuck-up cousins, the preference shares, ordinary shares don’t roll with a fixed dividend rate. Instead, they dance to the beat of the company’s profit drum, which can mean sky-high returns or just memories of better days.
Characteristics of Ordinary Shares
Besides being the life of the profit party, ordinary shares also pack a democratic punch, giving shareholders the right to vote on major company decisions. Owners of these shares can vote their hearts out at shareholder meetings, influencing the direction of the company like corporate captains.
Unlimited Profit Potential
With no cap on the amount of dividends they can yield, holders of ordinary shares are like financial adventurers, exploring the vast potential of the corporate profit landscape. It’s a roller coaster ride of financial ups and downs!
Voting Rights
Getting an ordinary share is akin to receiving your voting sticker during elections. Shareholders get to throw their opinions into the ring on pivotal matters such as electing the board of directors or approving mergers or acquisitions, which is way cooler than just liking posts on corporate social media.
Comparison with Other Share Types
- A Shares: Often come with additional goodies like more voting rights.
- B Shares: Might offer fewer voting rights but sometimes more dividends.
- Equity Share: Just another term loaded with snob appeal for ordinary shares.
- Non-Equity Share: These are like the distant relatives everyone forgets about during profit sharing time; they typically offer fixed dividends.
Related Terms
- Dividends: The company’s way of saying “Thanks for investing! Here’s some profit.”
- Preference Shares: Think of them as the VIP section in the stock market club. They get the financial appetizer before everyone else.
- Stock Market: The grand casino where shares are traded, dreams are made, and sometimes, wallets are emptied.
Recommended Reads
To delve deeper into the glamour (and sometimes, the gloom) of ordinary shares and other exciting financial instruments, consider adding these illuminating tomes to your library:
- “The Intelligent Investor” by Benjamin Graham: Get schooled on investment principles that have stood the test of time.
- “A Random Walk Down Wall Street” by Burton Malkiel: Understand the stock market’s eccentricities and how to navigate them.
Ordinary shares are not just ordinary; they are tickets to the thrilling roller coaster of corporate profits and a megaphone at the shareholder meetings. Remember, with great power comes great responsibility—especially when that power is the right to vote on the next CEO or approve a billion-dollar company merger!
