Public Limited Companies.

The property of a Public Limited company is divided into "little pieces" known as shares. Therefore, the owners of a Public Limited company are the shareholders, that is to say, the owners of the shares of that company.

Even though you only have one share, you are co-owner of a company, together with the other shareholders of the company.

Share of Tranvías Eléctricos de Granada, S.A., 1943.

In a Public Limited company, the profits are divided into equal parts among the shares. The more shares you have, the larger the portion of profits you get. A shareholder with 80 shares will get eight times more that another shareholder with only 10 shares.

What if the company suffers losses? The shareholder pays nothing. But, he/she will not be getting profits that year and that's it.

If a Public Limited company goes bankrupt due to its debts, those in real trouble will be the creditors. The shareholders do not have to pay anything.

The shares of a Public Limited company can be sold and bought in a public market. This place is known as the stock market.

This is the stock market in Madrid. In the past, the shares were bought and sold physically in this place. Nowadays, selling and buying shares is done through internet.

The main stock markets in the world are New York, Tokyo, London and Frankfurt. Every day thousands and thousands of shares of different types of companies are bought and sold in these markets.

The price of the shares is fixed by the law of supply and demand. This is a concept studied in the previous unit. If many buyers want to get shares of the same company, the price of the shares of this company increases. If, on the contrary, many shareholders of a company want to get rid of their shares at the same time, the price goes down.

If a person or a financial entity has capital (money), it can be invested on shares of a certain company. At the end of the year, this company will give the corresponding profits according to the number of shares bought.

A stock market speculator is simply a person or a financial entity that purchases shares when he/she considers they are cheap and then he/she sells them as soon as their price increases. They can win a lot of money in a short time, but they can  lose it as well.

In order to speculate in the stock market and not to go bankrupt, it is necessary to know precise information on the present and future operation of the companies whose shares are purchased.

In a Public Limited company a general meeting of shareholders is held every year. In this meeting each share gives you the right to one vote. In the general meeting of shareholders the board of directors is elected. This board is responsible for the day-to-day management of the Public Limited company.

Obviously, the largest shareholders are the ones that have representation in the board and they are also the ones that really manage the company. The rest of the shares have nothing to say.

There are sometimes fights for the power that lead to the mad purchase of shares by a shareholder who intends to take charge of the company through the only way possible, by owning a large portfolio of shares.

When a Public Limited Company needs money, it can get it through two different ways: one is the traditional way: asking for a loan. The other way is through a capital increase.

This procedure is simple: new shares are created and sold in the stock market. This way, the Publlic Limited Company obtains capital without getting into debt with the banks. However, this has its consequences: the more shares there are, the less value each one represents.