Types of Stocks from Public Companies

Companies issue their stocks to raise money to fund their projects and operations. These shares provide the holder with claims on the shares and stakes of the company.  Public companies offer different types of stocks. 

What are Public Limited Companies 

A public limited company (PLC) is a corporate structure in the United Kingdom that is similar to public companies in the United States. Even though a PLC may be constituted as a privately held company, it is often a public company. 

Ordinary Shares 

This is the most common type of shares that PLCs offer. It’s basically a common stock. It can be subdivided into different types like class A or B, which have different share prices. 

These shares grant shareholders the right to vote on issues that have something to do with corporate policy. Shareholders may also join the company’s board of directors, thus they sometimes get the name of ‘voting shares.’ 

Cumulative Preference Shares 

As the name suggests, this type of shares has a lot in common with preferred shares. Similar to the US’s preferred stock, they come with the rule that unpaid dividends should be carried forward and must be paid to preferred shareholders before the ordinary shareholders.  

This also applies to dividends that are paid late or any amount that has not been paid in full at the proper time. 

Preference Shares 

Preference shareholders have the right to be paid dividends before the owners of other share types. The dividends that are paid to them come at a fixed rate. 

That means that if the company profits and raises its dividends, preference stockholders usually do not get a raise. 

On the flipside, preference shares usually do not carry any voting rights. They also generally do not share any of the company’s success. 

Redeemable Shares 

As suggested in the name, redeemable shares are stocks that are issued with the shareholders’ agreement with the redeeming trait of the stock. 

In simple words, the company an buy the stock back either after a certain period of time or on a specific date. The date may be changed or set at the discretion of the company’s management team. 

Non-Voting Shares 

These shares are similar to ordinary shares except that they provide no voting rights to the investors. Non-voting shareholders are also not given the chance to attend annual or general meetings. 

This type of share is typically given to employees so that part of their compensation can be given in the form of dividends. 

This setup also typically grants some tax benefits both for the company and the employees. Non-voting shares can also be transferred to family members or the upper management. 

Bearer Shares 

Bearer shares used to be another form of stocks that come from PLCs in the United Kingdom. However, they were abolished under the law Small Business, Enterprise and Employment Act of 2015. 

These shares came in the form of warrants or legal documents that entitles the bearer to own the shares that are designated in the warrants. 

At Profit Star we strive to bring the best out of our students, guiding them through the complex world of financial markets.