Buying and selling company shares: our Complete Guide

Between 2000 and 2020, equities were the most dynamic asset class, delivering the highest returns for investors! Behind this generic term, however, lies a multitude of share categories, which it's worth knowing about before becoming a shareholder.

Let's discover our Complete Shareholder Guide!

What is a share?

A share is a security representing a fraction of a company's capital.

It gives the owner the right to take part in the management of the company, and remunerates him or her through the payment of a dividend. All the shares make up a company's equity capital . If the company is listed, it is referred to asmarket capitalization.

There are several categories of shares:

• Listed company shares: These are the shares of companies traded on financial markets, over-the-counter between investors. The value of these companies fluctuates every business day.
• Unlisted company shares: These are shares in companies that are not available on the financial markets. They can be acquired via specialized investment vehicles (SCPI, FCPI, life insurance, etc.).
• Bearer shares: These shares are held in your account via your financial intermediary (bank, trading platform), but the company of which you are a shareholder does not know you personally.
• Registered" shares: Shareholders with registered shares are entered in the company's legal registers.
• Ordinary shares: These are the "traditional" shares that give investors the right to information, the right to vote at the Annual General Meeting, financial rights and the right to receive dividends, if the company decides to distribute them.
• Preference shares: This category of shares entitles holders to special financial rights, or to a greater number of votes at the Annual General Meeting of Shareholders.

Why buy shares in a company?

Buying shares in a company offers a number of advantages: firstly, it enables an investor to take part in a company's project by contributing capital to support its ambitions.

This enables him to speak and vote at the Annual General Meeting.

Owning a portfolio of equities can help your assets grow in two ways:

• By receiving dividends, if the company decides to distribute them
• By realizing a capital gain when the shares are sold, if the sale price is higher than the purchase price.

How is the valuation of an unlisted company determined?

The share capital of an unlisted company is made up of a certain number of shares of equal value.

Very simply, if a company has a share capital of €10,000 with 1,000 shares, then each share is worth €10. In this case, owning one share gives you 0.1% of the capital, with a total value of €10. To own 1% of the capital, you need to own 10 shares, with a total value of €100.

When shares are sold, the same rule applies. In some cases, if the company has particularly improved its performance and justifies a higher valuation, and vice versa, experts may be called in to adjust the share valuation.

How do I buy shares in an unlisted company?

 If you want to buy shares in listed companies, you have two options:

• Using a securities account: This account enables you to buy and hold securities such as international shares. You can open one with a bank, insurance company or accredited financial intermediary. This gives you a personal, secure interface for buying and selling securities. The securities account is coupled with a cash account (also known as a "liquidity pocket") where dividends are paid.
• Use a PEA (Plan d'Epargne en Actions): This investment vehicle is similar to a securities account, but offers additional tax benefits. Capital gains generated via your PEA are tax-exempt after 5 years of ownership. The PEA is limited to European equities, with an investment limit of €150,000. It is also linked to a cash account to receive dividends.

In the case of an unlisted company, the purchase is made directly with the company or the seller, and not on the financial markets. The buyer then transmits his purchase order to his financial intermediary and receives a transaction notice.

However, it is important to understand the risks associated with this investment before making a decision.

All companies, whether listed or unlisted, run the risk of bankruptcy or a deterioration in their financial situation. As such, the value of a share can go down as well as up, and investing in this asset class entails the risk of capital loss.

When buying a stock, it's worth finding out about the company's dividend policy and risk profile.