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What is a Stockholder?

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  • Written By: Alexis W.
  • Edited By: Heather Bailey
  • Last Modified Date: 08 September 2016
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    Conjecture Corporation
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A stockholder is an individual who owns at least one share of stock in a given company. Most often, the term refers to individuals who hold stock in publicly held companies, which means the companies are traded on a stock exchange such as the New York Stock Exchange. A privately held company, however, can also issue shares of stock to the owners and those owners are also referred to as stockholders.

Also called shareholders, stockholders have an ownership interest in the company whose stock they own. When a company issues stock, it determines how much it needs to issue to raise the funds it needs. The percentage of ownership in a company that a stockholder has is dependent on how many shares of stock the company has. For example, if a company issues 100,000 shares of stock and a stock holder owns 90,000 shares, the stockholder has a controlling interest in the company and can dictate what occurs. On the other hand, if a company issues 100 million shares of stock, then a stockholder who owns 90,000 shares doesn't have as much influence or as much of a controlling interest.

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Stockholders who own a piece of a company can benefit when that company does well. Most commonly, the way a stockholder benefits from the good performance of a company is when the stock price rises. A company can also more directly share its profits with its stockholders in the form of issuing dividends. A dividend is a payment of some of the earnings of the company directly to stockholders; the dividend may be a few cents per share.

The stockholders are given the opportunity to vote and have a say in corporate matters. When corporations want to take certain actions, they send out a prospectus to stockholders who can then vote online or send in their votes via mail. Corporations must also share data about their performance, such as their earnings and their balance sheets, with their stockholders through public disclosures.

At times, stockholders serve a very important role in the takeover of a company. An individual or group of investors can actually achieve a hostile takeover of a business through buying up a controlling portion of the business' stock. They may do so by making an offer directly to all the stockholders of the company — usually of a price higher than each share of stock is currently selling for — in the hopes that all the stockholders will sell their shares to them, giving them control.

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EliseP
Post 1

When an individual owns stock in a company does that mean the individual has say in how it operates? And can the individual who owns stocks in a company lose all the money they have invested into them and how?

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