Stocks are shares in a limited company. Whoever purchases a stock thus owns a small part of the company. The buyer becomes a shareholder and thus a joint-owner of the limited company. The stock purchase is linked with the right to vote on the company’s orientation at the annual general meeting (also known as shareholder’s meeting).
The stock purchase is also frequently linked to a dividend. The dividend is part of the profit of a stock corporation that is distributed to shareholders.
In order for a share to be acquired and traded by the public, the company must have already made an initial public offering (IPO). The sale of shares is an opportunity for the company to generate capital. As a result, it can continue to grow and make new investments.
However, only companies that have already reached a certain size usually aim for an IPO, since this step involves considerable costs and administrative paperwork.