Finance: What Rights Does a Public Stockholder Have?

What rights does a public stockholder have? Common shareholders elect the board of directors. They vote. They have the right to quarterly financial disclosures in GAAP. 10Qs, 10Ks, annual reports... audited... are all obligations of the company.

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Transcript

00:27

shares for two grand. Now what? What rights do you have? Well, you always have

00:33

your right to party... old song, ask your parents. All right, but that won't help you [people party]

00:39

here. The company does wonderfully over the next few years and hits 40 bucks a

00:42

share. Well, you have a right to sell the stock, book your profit, pay your taxes... [share price graph]

00:47

yeah. And the same would be true if the company did horribly. Yeah, you could sell

00:51

it at 12 bucks, book your losses, come back to fight another day after crying. [sad words]

00:55

But as a minority shareholder in whatever.com where you own a hundred

01:00

shares out of the total 20 million they have outstanding, you own 100/20 million, [tiny person with lots of shares]

01:05

or 0.000005% of the company. So what rights should you

01:15

have? You're not exactly the control shareholder. Well, as a common shareholder, [person realizes his own insignificance in this cruel world]

01:20

American law gives you only a few rights, the biggest of which is to be able to

01:25

vote for the board of directors. You know, who then hires the CEO. So that's it. [person votes for board]

01:30

That's your big right that you have as a public shareholder. You can vote for

01:34

the board. And yes, you will cast a fraction 100/20 million of the [really tiny pie sliver]

01:40

votes, a very small percentage. About like voting for your local congressman, you'll

01:44

have some impact but not much. The key take away? Well, you don't have many [person talks to congressman]

01:48

rights. If they pay a dividend, you'll get that, and there are some other little

01:50

legal things, but don't hold your breath without a big oxygen bottle. So before [person with oxygen mask]

01:55

you hop into bed with a given stock investment, be pretty comfy that you have

01:59

confidence in the lunatics running the asylum. Yeah, or it could end up [people in asylum]

02:06

being a very bad investment.