Hi my name is Dani from Welathmakr and today I would like to introduce you to the different types of shares.
We will also take a look at Google and Alphabet shares.
First of all, we differentiate share types according to their transferability from one shareholder to another.
What types of shares can be found on the stock market?
There are bearer shares, registered shares and registered shares with restricted transferability.
The bearer share is the most common form of shares – it is enough to own the share file to have all the rights of a shareholder.
The corporation does not know at all times who is a shareholder and if you want to transfer or sell the share you do not have to inform the corporation.
That is with a registered share other of the corporation is the name known and is kept in the share register.
If you want to sell or give the share to someone else, you have to inform the corporation.
In practice, however, the custodian bank will do this for you.
Are there any special types of shares?
A special form of registered share is that of registered shares with restricted transferability.
In the case of registered shares with restricted transferability, your name is also entered in the share register.
However, the public corporation must first give its consent for transfers.
It can therefore refuse the sale or transfer to another person.
The reason why companies are introducing registered shares with restricted transferability is to
to protect themselves from hostile takeovers.
A further division of shares is the division into ordinary and preference shares.
What is the difference between alphabet A and C shares?
Let’s take a closer look at the Alphabet shares.
As a private investor I can buy the Alphabet A share or buy the Alphabet C share.
As you can see the Alphabet C share is about 20 Euro cheaper than the Alphabet A share.
Why is that?
This is because A shares are so-called ordinary shares.
It is a “normal share” which contains all shareholder rights.
The C share, on the other hand, is a preference share and, contrary to what the name suggests, it has a disadvantage over the A share, namely it has no voting rights.
For this reason, investors are not prepared to pay the same price for an A share with voting rights as for a tough C share without voting rights.
What are the benefits and disadvantages of the different types of shares?
Volkswagen, for example, is a German company that issues both ordinary shares and preferred shares.
For private investors, however, it is not a major disadvantage not to have voting rights, as the share of private investors in the company is usually so small that they do not have much of a say anyway.
To compensate for this lack of voting rights, some companies pay their preferred shareholders a slightly higher dividend.
This is then the preference that shareholders have over ordinary shareholders.
Let’s take a look at the example of BMW.
In 2014, BMW Corporation paid two cents more per share to its preferred shareholders than to its common shareholders.
So you can see that it can be very interesting for private investors to buy preferred shares.
You get the shares at a slightly lower price than the ordinary shares and have the chance to receive a slightly higher dividend.
Instead, you waive your voting rights, which is not interesting for private investors anyway, because the first few millions of investment are important.
The most common form of shares in Germany for example is the bearer ordinary share.
If a share is not an ordinary bearer share, you see this in the name. Either they are called registered shares or registered shares with restricted transferability for preferred shares.
Would you like to know more?
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