What is a Stock or a Share?

Many people today see words like stock marketing and stock only in news or newspapers. Even today many people fear that investing money in stock marketing means loss. And this is also because people do not have complete knowledge of stock marketing, people are worried that their money will get stuck. So, today we will give you full information about what is stock and what is stock marketing. (What is Share Marketing)

stock or share

What is a Stock or a Share?

What is a Stock or a Share


It all starts with a company, such as a private company, for example, the name of the company is ABC, which means that the company is wholly owned by the promoters. Apart from this, the company ABC is a production company and is doing well in its field.

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Now the owners want to expand their company to new cities and also do new research and development in their area for growth. And for all these the company needs capital (money).

Now, let us see the options available to the owners to get the required capital.

First, the company will try to get capital from its own promoters to expand the company. This is the easiest way to raise capital, as promoters can easily invest their savings/holdings in the company for its growth. A similar option can be friends, and family, who may be ready to invest money in this company.

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If these two are not enough, another option can be for angel investors or venture capitalists to raise funds. But here, the owners have to give a part of their company (stakes) to these investors. Also, it is a bit difficult to find angel investors or (Venture Capitalists).

If none of the above options meet the full capital requirement for the company, it will have to approach the largest funding source, the bank. These banks can give a large loan to the company for which they have to pay some interest and fully return the capital at the end of the term. However, paying off the loan with interest can be a troublesome option for companies.

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What is the option for Company ABC now? Where can Company ABC get such huge capital? The answer is public. Company ABC can get a large amount of money in return for its money by giving people little ownership of the company. And from here the journey of company ABC in the stock market begins.

A stock market is a place where the company will be able to sell its ownership (in the form of stock) to the public.

Why else would people buy shares of Company ABC?

It totally depends on how positive people are about the growth of the company in terms of sales, earnings, revenue, etc. Then the public would buy the stock to trade their money with the ownership of the company. These shares can increase in value as the company performs well in the future, thereby providing good returns to the public investors.

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Thus, by giving ownership share, Company ABC will be able to accumulate huge amounts of money for its growth and development.

So, the ownership part of the company is called stock or share.

Stocks or Shares

Stock is a general term used to describe the ownership of any company. Stock represents a claim on a company’s assets and earnings. As you acquire more stock, your ownership stake in the company becomes higher. Shares, equity, or stock, all mean basically the same thing.

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Normally, the company does not offer its full shares to the public. Almost all the owners (promoters) keep a part of the stock with them to keep their share ownership in their hands. For example, Mukesh Ambani of Reliance Industries holds about a 51% stake in the company. The rest they have sold to the public, FIIs, DIIs, etc.

Let’s understand this better than the second example. Let’s say company ABC decides to offer 10,00,000 shares which constitutes the entire value of the company. Out of the total, it decides to offer 6,00,000 shares to the public and to keep the remaining 4,00,000 shares with the promoters. Here, the promoters hold 40% ownership of the company.

share market
share market

What is Share Market


Now that you understand what stocks are, let us also look at the standard definitions of stock market terms discussed in the above discussion.

Share Market

The stock market is the market in which shares of publicly held companies are bought or sold through exchanges or over-the-counter markets. It is a place where shares of publicly listed companies are traded. The stock market can be divided into two main sections. Primary market and Secondary market.

Primary Market – This is the place where new shares are sold for the first time through a public offering i.e. IPO or Initial Public Offering. Retail investors, mutual funds, and domestic and foreign institutional investors buy shares from promoters. Institutional investors usually buy most of these shares during the company’s first issue.

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Secondary Market – All subsequent business runs in the secondary market where participants include both institutional and individual investors.

Campus Activewear IPO
Initial Public Offering (IPO)


Initial Public Offering (IPO) and Initial Public Offering (IPO)

IPO means the first time the shares of a private company are offered to the public. It is a source of collecting funds from the public to finance their projects for the first time in the market. In return, the company gives shares to the investors in the company. IPOs are often issued by smaller, smaller companies seeking to expand their capital, but they can also be attempted by large privately-owned companies that are publicly traded.

Now, let’s take the story further. Company ABC has decided to enter the stock market.

When the company enters the market for the first time, it has to provide an offering price of shares for the public to buy. This process of entering the market is called Initial Public Offering (IPO). IPO is offered in the primary market, where the seller is the company and the buyer is the public. After the IPO, the stock moves to the secondary market, where both the buyer and seller are public. Here the public generally uses the ownership of the company to trade/invest or just to book profits. Recently Campus Activewear launched its IPO.

Market Capitalization

Market cap or market capitalization refers to the total market value of a company’s shares. It is calculated by multiplying the total number of shares of the company by the current market price of one share. The investment community uses this figure to determine the size of the company. Let us understand this with an example.

Friends, we would also like to define the term free-float market capitalization here. It is the product of the total number of shares offered to the public and the price per share. Let’s say company ABC decides to offer 10,00,000 shares which constitutes the entire value of the company. Out of the total, it decides to offer 6,00,000 shares to the public and to keep the remaining 4,00,000 shares with the promoters. Here, the promoters hold 40% ownership of the company.

Let us say that the price of each share of Company ABC is Rs 50 and it offers 6,00,000 public shares. Then, here the free-float market capitalization will be equal to 50 * 6,00,000. The total market capitalization will be 50 * 10,00,000.

READ MORE- What Is Money Market?

Summary


Friends, in this post we have explained in very simple language what are shares or stocks? What is the share market or the stock market? What is the stock? Stock Market kaise kam karta he? Although this is just the beginning guys. Next, you need to understand the advanced stock market terms like Sensex, NSE, BSE (Sensex, NSE, BSE), etc.

So that you can make your investment in the stock market without any hesitation. And really friends, if you invest in the right direction, then there is only profit. With which you can fulfill your dreams.

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Because stock marketing is such a platform where we can get more profit in less time.

Because in today’s date the expenses are more and the income is less in the middle-class family and in the middle-class family people are busy in work and are unable to pay attention to all these things and remain the same from where they started. But friends, a little attention and information can take you a long way and make your dreams come true.

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