Shareholder in the Stock market

An individual, an organization or an institution holding at least one share of a company is known as a shareholder. A shareholder can purchase any number of shares of a company and thus becomes a part-owner in the company on purchasing those shares. This part-ownership lends the rights to profits of the company, which are given out in the form of dividends. The dividends are based on the number of shares held by the shareholder. All shareholders have the freedom to sell their shares as and when required. They can also purchase more shares of a company after carefully studying the financial trajectory of the company.

Depending on the ownership type, shareholders may have voting rights in the company and can be a part of the company’s decision making. These voting rights may be exercised while nominating directors, deciding on acquisitions and mergers or any other decision the company deems important for shareholders. If a company violates the terms of ownership, a shareholder can sue the company legally.

Shareholders can buy shares during the initial public offering (IPO) when the company’s shares are freshly listed on a stock exchange. This way they directly contribute to the company’s capital. Since IPO is limited, most shareholders buy their shares in the secondary market and thus have not directly contributed to the company’s capital.

As the term ‘shares’ is interchangeably used with ‘stocks’, a shareholder can also be called stockholders. Shareholders are different from stakeholders as the latter is a broader term used to describe everyone benefitting from a company including customers and employees. Since shareholders also benefit from the growth and prosperity of a company, they are stakeholders too.

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