Buy a share of stock and you own a small piece of a company. Not a physical piece, but a legal claim on its earnings and assets. If the company prospers, the share price rises and you may receive dividends. If it stumbles, the share price falls and you can lose part or all of your investment. Shares are the building blocks of stock markets and modern corporate ownership.

Companies issue shares to raise money. A startup might sell shares to venture capitalists. A growing firm might hold an initial public offering, selling shares to the public for the first time. The total number of shares a company issues determines how ownership is divided. A founder who holds 10 million shares out of 100 million total owns 10 percent of the company.

Shareholders have rights. They vote on major decisions, like electing the board of directors and approving mergers. They receive annual reports and can attend shareholder meetings. In practice, most individual shareholders do not vote, and institutional investors like pension funds and mutual funds hold most of the power. That concentration of ownership has made corporate governance a subject of intense debate.

Share basics

• Common shares: voting rights, variable dividends
• Preferred shares: fixed dividends, priority in bankruptcy
• Share price: determined by supply and demand
• Market capitalization: share price times total shares
• Dividends: portion of profits paid to shareholders