Le 14/02/2011 13:12, Invisible a écrit :

>>> Now you're talking. You mean to say that you can make money simply by
>>> owning a share? (As opposed to trading it.)
>>
>> Yes.
> 
> Right. So a share has value because you can earn money from it. And the
> value varies according to how profitable the company is because that
> money comes from the company's profits.

Well, the initial value of the share is the portion of the capital it
represents: If the company has a registered capital of 10 Millions, and
the original owner want to put 40% on the market, the initial emission
of the capital stock will be valued for 4 Millions. The number of shares
simply divide that amount.
It is sometimes more efficient to make many share at 4€/$ than just a
few at 4000€/$ : the market is more receptive (the small traders cannot
afford a 4000€/$ one, whereas they can take a lot of 4$/€ ones!)

One second after the delivery of the share to the market, a share is
worth only what other traders are ready to buy it at. They usually
forget the initial price and looks only at the ratio of dividend/price.


Dividend: each year (usually), the benefit from the company get
distributed (re-invested, salary-raise and share holders). The part for
the share holder is the dividend. The dividend may be paid in cash or
with more shares! (company's choice, not share's holder unless company
decides so). Which means that no dividend is bad for the value of the
share...



Let's look at a case: Eurotunnel (tunnel under the channel)...
Introduced at about 8, IIRC, while the tunnel was not yet done.
No dividend before the tunnel could exist, but large promise of benefits
in future (including free pass...).
Price went up to 76 over a few years.
(so, if you had bought at 8 and were selling at 76... yummy! that was
about 900% benefit! Your house of 1 Million became a castle of 10
Millions (with a park!) ! Even with inflation, very yummy...).
Events happened...

Shares get bought back (or forever lost) at 0.02 !
If you bought at 8, from 1 Million only remains 2500.
If you bought at 70 (oh, lucky, get on the wagon now!), from 1 Million
only remains less than 300!

I have the 300, can I get the million please ?

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