Different Types of Shares
Up until this point of our series of articles on the basics of share investment we've been concentrating on the ownership of ordinary shares. As the name suggests, these are the "norm" when it comes to shareholding. There are, however, different types of shares - let's look at those in a bit more detail:
Preference Shares are another type of share that you may well come into contact with. These are a particular type of share that often give the holder greater rights than those who hold ordinary shares, while also having a restricted associated risk. Once popular, you'll find that preference shares are rarely offered by companies on the UK stock exchange but still be aware of them - some shareholders in established businesses may hold these as a result of a historical release.
One of the key advantages of a preference share is that, should the company fall into financial problems, preference shareholders receive the full value of their share capital before any money is made available to holders of ordinary shares.
The will also have a fixed dividend - this can also be a disadvantage though, since holders of preference shares will not benefit from any increase in dividents, unlike ordinary shareholders.
Deferred shares are not particularly common when talking about public companies quoted on the London Stock Exchange. When they do crop up you'll often find that they were issued to founders of a company, or others in senior positions. They will almost certainly give particular benefits to the holders. For instance, holders of deferred shares may be entitled to some percentage of profits, usually after dividends have been paid to ordinary and preference shareholders.
The shares with a funny name! 'A' Shares refer to shares given to individuals who have no voting rights. This may seem strange and is a situation that usually only occurs when the company wishes to raise money (capital) but where exisiting shareholders wish to retain a certain level of control.
Information on Shares:
The basics of investing in shares, Different Types of Shares, The Stock Market Explained, What is the FTSE 100?