Share (also referred to as equity shares) of stock represents a share of ownership in a corporation.
Here is a company call ABC, “ABC Holdings Bhd.”. For example is company listed in Kuala Lumpur Stock Exchange (KLSE), and its total properties and cash worth $100. If this company issue 100 shares, that means every share of this ABC company worth $1 per share. When you buy 1 share, you are one of the shareholders of the company ABC. In other words you own 1% (1 share out of total 100 shares) of this company.
This ownership of the company, or call “share” is trade in the stock and share market (stock exchange). When you don’t want to involve in this company, you can sell out your share to other people or you can buy the share from other people. Of course, to trade the share, you need to Remisier do it for you.
From the previous example, you own 1 share of company ABC. You bought it last year. This year they announce their company result and they total earn another $200. This means company ABC now worth $100 + $200 = $300. Divided the value to its total share issue, which is 100 shares, each of the shares REAL VALUE is $3. Bear in mind your starting investment capital is $1 and now this company earn money and worth $3. You are shareholder and you earn $2. Your investment value increase 300%. BUT, the TRADE VALUE may not same as the REAL VALUE. This share can be trades in any price in the stock market depend on the share holder (seller) and share buyer.
The CEO of the company ABC gives his speech during the company result announcement. He says company performance will be better than this year for the coming result. He forecast the company earning can increase and earn total $300 in coming year. If his forecast is correct, company ABC will total worth $300 + $300 = $600. Each share will worth $6. Some of the investor believe, some of don’t believe. Now the share traded at price $4. You want to buy? Or you want to sell? With this price.
If you are confused with your situation, let me give you a summary here. From the latest result announce, company ABC profit improve and worth $3 each share, now buyer in the market offer $4 to buy from you. You want to sell at $4 or you hold your share or you buy more from stock market? If you think next year this company will lose money, why not sell now? If you are not sure the performance yet, you can hold. If you think the performance result will increase as the CEO told, why not buy more?
In stock market, there are different types of people. These people buy or sell has their own reason. Most of the time, they play the psychological games with you, little bit similar to the TV show call “Deal or No Deal”. You have a share on hand (the brief case), buyer offer a price you buy your share (the brief case). Deal or No Deal?
Here is a company call ABC, “ABC Holdings Bhd.”. For example is company listed in Kuala Lumpur Stock Exchange (KLSE), and its total properties and cash worth $100. If this company issue 100 shares, that means every share of this ABC company worth $1 per share. When you buy 1 share, you are one of the shareholders of the company ABC. In other words you own 1% (1 share out of total 100 shares) of this company.
This ownership of the company, or call “share” is trade in the stock and share market (stock exchange). When you don’t want to involve in this company, you can sell out your share to other people or you can buy the share from other people. Of course, to trade the share, you need to Remisier do it for you.
From the previous example, you own 1 share of company ABC. You bought it last year. This year they announce their company result and they total earn another $200. This means company ABC now worth $100 + $200 = $300. Divided the value to its total share issue, which is 100 shares, each of the shares REAL VALUE is $3. Bear in mind your starting investment capital is $1 and now this company earn money and worth $3. You are shareholder and you earn $2. Your investment value increase 300%. BUT, the TRADE VALUE may not same as the REAL VALUE. This share can be trades in any price in the stock market depend on the share holder (seller) and share buyer.
The CEO of the company ABC gives his speech during the company result announcement. He says company performance will be better than this year for the coming result. He forecast the company earning can increase and earn total $300 in coming year. If his forecast is correct, company ABC will total worth $300 + $300 = $600. Each share will worth $6. Some of the investor believe, some of don’t believe. Now the share traded at price $4. You want to buy? Or you want to sell? With this price.
If you are confused with your situation, let me give you a summary here. From the latest result announce, company ABC profit improve and worth $3 each share, now buyer in the market offer $4 to buy from you. You want to sell at $4 or you hold your share or you buy more from stock market? If you think next year this company will lose money, why not sell now? If you are not sure the performance yet, you can hold. If you think the performance result will increase as the CEO told, why not buy more?
In stock market, there are different types of people. These people buy or sell has their own reason. Most of the time, they play the psychological games with you, little bit similar to the TV show call “Deal or No Deal”. You have a share on hand (the brief case), buyer offer a price you buy your share (the brief case). Deal or No Deal?
6 comments:
Wonsim, please delete the previous reply, and use this reply instead.
Dear wonsim, interesting topic.
So do you mean the initial price when company want to 上市 is based on the company total property and cash?
If the company have total property and cash of RM1,000,000, and they only want to issue 100,000 shares, does this means their share will be starting at around RM10?
And how actually company gain capital from going to public listed?
If let's say before company listed, they have total of RM1,000,000. After they go public listed, they will have a second source of capital, where the share will be RM1,000,000 worth at starting?
So can we say that company going public listed with the purpose to double their total capital? instead of only have RM1,000,000 (existing fund in company), after initial listed, they will have RM1,000,000 (existing fund in company) + RM1,000,000 from public provided all shares issued to public are sold at the issue price ?
Based on logic, is that happening like this?
And, what's the requirement for a company to listed in second board and main board?
Is it they need to have turnover, revenue or nett profit of greater than x amount before qualified?
Correct me if I'm wrong. After I read your post, here's my comment and question though :)
If company currently $100 (cash + property), they issue 100 share, then it will be $100/100 share= $1 per share.
So when company earn another $200, their cash + profit will be $100 + $200= $300.
Now, company will say their share value in klse should be $300/100 share= $3.
So, public will know their share is 低估了， or 高估了。
but this is no use also, coz if a share got many speculator, their share can always go up and down,
it won't reflect the actual price the share should currently have.
Especially when economy crisis happen, even a company financial very strong, and continue to earn money and share price should be at RM10, it still follow the whole market to drop to RM5 or below, due to speculator all sell off.
Is this what you mean?
I'm newbie in stock, 多多指教
Hi Albert,
Ya, it is correct in some way. The initial listing price, the IPO price is count by the value of the company. Besides the properties, cash, project, future potential income, and so on. You can try to read an IPO prospectus as there is lot of information inside. The authority who value the company will analyze it quite detail.
The example you use to count the IPO price is suitable too. It is the simple way to explain how they count the price. In real case, they have more to take into consideration.
The company goes listed in the stock market because they want to share out the equity and raise the money. They actually don’t “gain or earn” money. They raise the capital is for development purposes. For example you have a company with value $1,000,000 now; it doesn’t mean you have that cash value on hand. You have idea to expand and you need $2,000,000 what you can do is you issue IPO to raise $2,000,000 from the stock market. You have to promise to your shareholders in the stock market that you are able to get return from the money.
Sorry that I don't really understand this: "If let's say before company listed, they have total of RM1,000,000. After they go public listed, they will have a second source of capital, where the share will be RM1,000,000 worth at starting?"
Actually company will not "gain or profit" from issuing share. It is not a income source for a company. Stock and share is for company to "borrow" money. It is similar that you want to expand business, you borrow money from your sibling or cousin or friends, you can pay back to them by cash with interest rate or you invite them to join and share your company. The second method is the example of stock market raising capital.
Detail of the listing requiremnet you can get it from here: http://www.bursamalaysia.com/website/bm/rules_and_regulations/listing_requirements/mbsb/
I will post a summary of initial listing requirement later for your references.
Regarding the share price, the trading price is most of the time not parellel with the real price. It is because when the result announce, it is from a pass from now record. The record is just for the references and you judge and make decision from the market sentiment. The price doesn't reflect the actualy value but for investor, of course you can refer the recorded value to make decision what price and when to buy the share or sell your investment.
When market crisis, some times people sell because they scare. they have no confirdence for the company on their hand. So need time to learn how to choose good company to invest. Lot of people invest and buy during the crisis because there are lot of panic sell.
Panic selling is the time investors are force to sell or they sell because they scare. At that time they didn't think ho much the value on their hand worth. When market crisis, why Warren Buffet buy?
why company want to borrow money from public instead?
because the money they can borrow from bank is limited?
because borrow from public is not entitled for loan interest?
because if in future go bankruptcy, only stock owner loss, company no need to pay interest when loss money?
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