We’re the proud owner of 500 shares of stock for Botaniface, Inc., a company that manufactures and sells botanical anti-aging products. But, even though we like Botaniface, and even though the stock has been performing pretty well lately, we don’t necessarily want to buy any more shares right now. That’s why we were happy Botaniface issued a “renounceable right” this year, which is the option—but not the obligation—to buy additional shares at a discounted price.
The great thing about a renounceable right is that, not only do we not have to buy the shares if we don’t wanna, but we can sell the right to someone else. That way, even if we don’t exercise the right, we’re still not completely losing out on the deal.
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Finance: What Rights Does a Public Stock...67 Views
Finance, a la Shmoop. What rights do you have as a common [intro screen]
stock public shareholder? All right, so you've saved your newspaper delivery money now [question on chalk board]
for a year, saved over two grand, and you've had your
eye on a hundred shares of whatever.com, which conveniently hit exactly 20 bucks [person buys shares]
a share today, including commissions, if you want to sell it. So you buy a hundred
shares for two grand. Now what? What rights do you have? Well, you always have
your right to party... old song, ask your parents. All right, but that won't help you [people party]
here. The company does wonderfully over the next few years and hits 40 bucks a
share. Well, you have a right to sell the stock, book your profit, pay your taxes... [share price graph]
yeah. And the same would be true if the company did horribly. Yeah, you could sell
it at 12 bucks, book your losses, come back to fight another day after crying. [sad words]
But as a minority shareholder in whatever.com where you own a hundred
shares out of the total 20 million they have outstanding, you own 100/20 million, [tiny person with lots of shares]
or 0.000005% of the company. So what rights should you
have? You're not exactly the control shareholder. Well, as a common shareholder, [person realizes his own insignificance in this cruel world]
American law gives you only a few rights, the biggest of which is to be able to
vote for the board of directors. You know, who then hires the CEO. So that's it. [person votes for board]
That's your big right that you have as a public shareholder. You can vote for
the board. And yes, you will cast a fraction 100/20 million of the [really tiny pie sliver]
votes, a very small percentage. About like voting for your local congressman, you'll
have some impact but not much. The key take away? Well, you don't have many [person talks to congressman]
rights. If they pay a dividend, you'll get that, and there are some other little
legal things, but don't hold your breath without a big oxygen bottle. So before [person with oxygen mask]
you hop into bed with a given stock investment, be pretty comfy that you have
confidence in the lunatics running the asylum. Yeah, or it could end up [people in asylum]
being a very bad investment.
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