What Is A Stock And How Do They Work?

So first of all the first thing we have To discuss is what is a stock a stock is A share in the ownership of a company And this is something a lot of people Don't realize a lot of people look at a Stock and they see it as a stock ticker A blip on the screen or a three or four Letter symbol a stock is really a share In the ownership of a company so when You invest in stock you're investing in That company you're a part owner of that Company even if it's a very small part You own a piece of that company and as a Result this is Holdings of a portion of The company's assets as well as their Liabilities so this ownership stake is Relative to the number of shares owned Versus the shares outstanding so if you Have a lot of shares of that company you Are a larger owner and if you have just A few shares of that company you are a Much smaller owner so your ownership is Relative to the number of shares you own Versus the number of shares out there But nonetheless even if you own one Share of a company you own a small piece Of that company now a stock may offer Rights to vote vote in company decisions Depending on the share class and we're Going to discuss that in the next slide Here and that's something important too Guys you have to understand that when You invest in a company because you're An owner you have to vote in company

Decisions and I always encourage you Guys to you know take advantage of those Opportunities and you should vote in Company decisions because you're part of The owner of that company you know you Have just as much to say as anyone maybe You don't have as much of a vote because You know you don't own as many shares as Some people but you do have a say in Those company decisions and obviously The voting power corresponds with the Ownership Stakes so if you have many Voting shares you have a larger say and If you have less shares you have a Smaller say in those company decisions It is important to consider whether or Not you have voting rights as a Shareholder and I always look for a Company that allows me to vote in Company decisions so just for an example Of a company that did not do this we Have Snapchat and they recently went Public so Snapchat offered Class A Shares which do not include any voting Rights or any votes so if you're a Snapchat shareholder and you own class A Shares which are the ones that have been Traded and that are on the secondary Market you have no say in those company Decisions you have to rely solely on Those who have voting shares the class B Shares get one vote per share and these Were reserved for the early investors as Well as the executives and then the

Class C Shares are held solely by the Co-founders and they get 10 votes per Share while the class B voters got one Vote per share so just to put a picture On this or just to explain this to you Guys the Snapchat co-founders hold 88.5 Percent of the voting power while the Public shareholders hold absolute zero Percent voting power so that's not Something I like to see when I'm Investing that's why I'm always looking For a stock that offers me voting rights Um I know if you guys know Google when They split shares they offered everybody Who had an existing share one non-voting Share per share they had so that's why You have the g-o-o-g and then the G-o-o-g-l one of them has voting rights One of them does not have voting rights So that's just another example there but I always want to be buying shares of a Stock that I have you know voting rights Because I want to have a safe company Decisions I don't want the co-founders Or anybody to have 88.5 voting power That means that pretty much whatever They say goes and I like to have more of A say in the companies that I'm part Owner of So what is the purpose why would a Company go public so companies offer Shares to the public to raise Capital Through an initial public offering so This is why a company will go out there

And they will you know offer shares to The public basically companies can also Raise money through borrowing or Corporate bonds and we're going to talk About bonds a lot in this course Numerous times but just to start off a Bond is a debt obligation and Bondholders receive interest in return For loaning the principal a lot of People but there are the lines between Stocks and bonds and we're really going To get into the difference of those two Things because they are not the same Thing at all but what is important to Remember is that because they Bond as a Debt obligation bondholders take Priority over shareholders during a Bankruptcy filing so if worst case Scenario you're invested in a company That goes bankrupt understand that Anybody who is a bondholder they're Going to get paid before the Shareholders do because you're part of An owner of the company where they're Just a debt obligation so as a Shareholder you are last in line as far As the distribution of remaining assets Goes that's really nothing to be afraid Of I mean if you're making sound Investments there's not a high risk of a Company going bankrupt I mean if you're Making high risk Investments yeah There's a higher risk of a company going Bankrupt so just keep that in the back

Of your mind that shareholders are Pretty much last in line as far as Distribution goes when they go bankrupt And they're finally sorting things out