This is the mechanism by which firms raise capital from investors willing to take an equity stake in a business and share directly in its fortunes.

As a firm grows a shareholder may expect to receive an income return in the form of a dividend and also see the value of their share rise. As part owners of the business they are also entitled to vote at shareholder meetings on key issues such as whether the directors are reappointed or not. They also carry some risk in the event a firm goes bust since shareholders rank behind bond holders and other creditors in terms of recovering their money. Shares may be privately owned, in which case they can only be bought as and when existing shareholders decide to sell or they may be more freely available on a public market such as the London Stock Exchange if the issuer is listed.

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