You’ve already learned a little bit about how a corporation in the Philippines takes form. Having this idea is essential in understanding the basics of stock investing.
In this article, let’s take that knowledge another notch higher and touch the subject of you actually becoming a stockholder of a company.
By definition, a stockholder – sometimes also called a shareholder – is someone who owns a piece of a business enterprise structured as a corporation. And no matter how small your share is, if you are a stockholder, you are entitled to the following rights:
- The right to vote.
- Pre-emptive right.
- The right to examine the books of the corporations.
- The right to receive dividends when paid.
- The right to transfer shares from themselves to others.
- The right to receive the remaining assets of the corporation after all other claims on the property of the corporation are satisfied.
Cool, right?
Did you know that it’s also very easy to become a stockholder in the Philippines? It doesn’t even require that you pour in millions of pesos to become a shareholder of the most popular companies in the country such as the following:
- Ayala Corporation
- Semirara Mining Corporation
- SM Investments Corporation
- Aboitiz Power Corporation
- Petron Corporation
Those are some of the big and familiar businesses that are publicly listed in the Philippine Stock Exchange. But actually, there are so many companies to choose from and surely there’s one out there that looks attractive to you.
Are you itching to go on a buying spree?
Relax. There are a lot of things to learn, traps to avoid and we’ll cover them along the way. First, ask yourself: “How can I acquire shares of stock from a company?”
The short answer is: There are two ways of acquiring shares of stocks from a company, namely:
- by subscription
- by purchase
Let’s explore each one.
Two Kinds of Stock Subscription
Stock Subscription is defined as a contract to buy certain number of shares from a corporation out of its un-issued stocks. Investors may subscribe shares of stocks from a company in two ways:
1. Pre-incorporation Subscription. This is done by the original capitalists or investors of a particular corporate business venture before the entity gets its Certificate of Incorporation from the Securities and Exchange Commission.
2. Post-incorporation Subscription. Any future subscriptions after the release of the Certificate of Incorporation fall under this category.
In any case, stockholders are issued their respective Stock Certificates as soon as the subscribed stocks as already fully paid.
(See also: The Anatomy of a Philippine Corporation.)
3 Ways to Purchase Shares of Stocks
1. Buying Directly From the Company
One of the ways a corporation raises money is by issuing shares of stocks to investors. This method is sometimes called a primary offering, and the proceeds of the sale goes to the company’s treasury, which in effect forms part of its capital.
An example of this is when a company offers shares to the public for the first time. That is, the company goes public. This event is referred to as an Initial Public Offering or IPO.
Take note that an IPO is not the only time the company is allowed to issue stocks to the public. It can do so anytime after that and this practice is known as follow-on offerings.
2. Buying From Other Stockholders who want to sell their shares.
This practice is commonly referred to as a secondary offering. Here, it’s the existing shareholders who are selling their shares of stocks to the new investors.
In this case, the company doesn’t receive any fresh funds anymore.
3. Buying From the Stock Market
An individual investor like you would probably be interested in investing this way – over the Stock Market.
In our country, the main avenue for trading shares of stocks is the Philippine Stock Exchange whose “main function is to facilitate the buying and selling of stocks and other securities through its accredited stockbrokers or trading participants.”
Check out the publicly listed companies from the PSE Website and see if there is one that you like.
Take note, however, that if you are new to the world of investing, you should avoid doing stupid things like investing in something you know nothing about.
Take your time to study the field even more. It will be to your advantage.
And PeraTree website is certainly useful in that area. So keep yourself posted as we continue to add more contents. Grow in financial knowledge with us.
(See also: How to setup an emergency fund.)
P.S.: Another way of getting additional shares of stocks is when the company declares and distributes stock dividends to their existing shareholders. We’ll have more on that in some future articles.
