| In order to understand what stocks are and how | | | | ownership. The more shares you own, the more |
| stock markets work, we need to dive into | | | | of the company you own, and the more control |
| history--specifically, the history of what has come | | | | you have over the company's operations. |
| to be known as the corporation, or sometimes | | | | Companies sometimes issue different classes of |
| the limited liability company (LLC). Corporations in | | | | shares, which have different privileges associated |
| one form or another have been around ever | | | | with them.So a corporation creates some shares, |
| since one guy convinced a few others to pool | | | | and sells them to an investor for an agreed upon |
| their resources for mutual benefit.The first | | | | price, the corporation now has money. In return, |
| corporate charters were created in Britain as | | | | the investor has a degree of ownership in the |
| early as the sixteenth century, but these were | | | | corporation, and can exercise some control over |
| generally what we might think of today as a | | | | it. The corporation can continue to issue new |
| public corporation owned by the government, like | | | | shares, as long as it can persuade people to buy |
| the postal service.Privately owned corporations | | | | them. If the company makes a profit, it may |
| came into being gradually during the early 19th | | | | decide to plow the money back into the business |
| century in the United States , United Kingdom and | | | | or use some of it to pay dividends on the |
| western Europe as the governments of those | | | | shares.Public MarketsHow each stock market |
| countries started allowing anyone to create | | | | works is dependent on its internal organization and |
| corporations.In order for a corporation to do | | | | government regulation. The NYSE (New York |
| business, it needs to get money from | | | | Stock Exchange) is a non-profit corporation, while |
| somewhere. Typically, one or more people | | | | the NASDAQ (National Association of Securities |
| contribute an initial investment to get the | | | | Dealers Automated Quotation) and the TSE |
| company off the ground. These entrepreneurs | | | | (Toronto Stock Exchange) are for-profit |
| may commit some of their own money, but if | | | | businesses, earning money by providing trading |
| they don't have enough, they will need to | | | | services.Most companies that go public have been |
| persuade other people, such as venture capital | | | | around for at least a little while. Going public gives |
| investors or banks, to invest in their | | | | the company an opportunity for a potentially huge |
| business.They can do this in two ways: by issuing | | | | capital infusion, since millions of investors can now |
| bonds, which are basically a way of selling debt | | | | easily purchase shares. It also exposes the |
| (or taking out a loan, depending on your | | | | corporation to stricter regulatory control by |
| perspective), or by issuing stock, that is, shares in | | | | government regulators.When a corporation |
| the ownership of the company.Long ago stock | | | | decides to go public, after filing the necessary |
| owners realized that it would be convenient if | | | | paperwork with the government and with the |
| there were a central place they could go to trade | | | | exchange it has chosen, it makes an initial public |
| stock with one another, and the public stock | | | | offering (IPO). The company will decide how |
| exchange was born. Eventually, today's stock | | | | many shares to issue on the public market and |
| markets grew out of these public places.StocksA | | | | the price it wants to sell them for. When all the |
| corporation is generally entitled to create as many | | | | shares in the IPO are sold, the company can use |
| shares as it pleases. Each share is a small piece of | | | | the proceeds to invest in the business. |