What is Shareholder in Stock Market

What is a shareholder?

 A shareholder is the holder of one or more shares of a company. These shares entitle him to attend general meetings of the company, to participate in the strategic decisions of the company (if a voting right is associated with the share ) and to receive the payment of dividends (if the company pours). The shareholder can be a natural person (an individual) or a legal person (a company).

How to become a shareholder

To become a shareholder, you have to buy company shares in return for cash. If the company is listed on the stock exchange, the transaction is made via an organized market (such as Euronext for example). In this case, you must find a counterpart (a seller) who no longer wishes to be a shareholder of the company. Simply place a stock market order through a broker and place a buy order to become a shareholder.

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If the share is not listed, becoming a shareholder is more complicated. Shareholders must agree to open the company's capital to other shareholders or one of the shareholders must sell their shares.

The rights of a majority and minority shareholder

 A majority shareholder is a person holding at least 50% of the voting rights of a company. He has decision-making power within the company even if all of the remaining shareholders do not agree with him. Please note that a shareholder can hold more than 50% of the shares but have a lower voting right (certain shares do not give access to the right to vote). It is therefore not a majority shareholder. Note that it is rare to see a majority shareholder for a listed company.

All the other shareholders are minority shareholders. This is the case for example of an individual holding only a few shares but also of the investment fund holding several% in the capital of the company. Only, their power to influence the decisions of the company is limited by a minority shareholder who holds several tens of% of the capital.

However, minority shareholders can associate with each other. If they manage to combine 10% of the capital and voting rights, they can request the appointment of an expert to analyze management decisions. If the minority shareholders manage to regroup to form a block representing at least 1/3 of the capital and the voting rights, then they can form a blocking minority, then it can block the decisions taken during an extraordinary general meeting ( modifications of the statutes, of the share capital ...) but not the current decisions taken during an ordinary general assembly.

The different types of shareholders

There are 3 main types of shareholders:

 individuals: These are shareholders whose sole objective is to increase the share price. They can be simple individuals but also employees of the company who receive shares as additional compensation. Their investment horizon can range from the short term (trading) to the very long term (investment).

 Institutional: These can be hedge funds, pension funds or even companies. The objective of these shareholders is very often speculative, but they also wish to influence, if possible, the strategic decisions of the company by purchasing a large number of shares.

 The State: It is a very specific shareholder. Its purpose is twofold. It wishes both to derive financial benefits from its investments but also to defend public interests in strategic sectors for the country.