What Does the Financial Term Stockholder Mean?

Stockholders are owners of assets.

Many financial terms seem dated, awkward and opaque to the uninformed. Words like short, long, "PnL" and flat are all shorthand terms for people in the know but can obfuscate the point for people not steeped in the lingo. Like any industry, the financial sector has developed its own argot over the years. Some terms were adopted from other industries and others were created from within.

Stockholder

A stockholder or shareholder is someone who holds ownership, partial or total, in an interest. An interest can be a company or it can be an asset. Holding stock in something is a broad term that can have very a broad definition.

Ownership

Owning stock can mean owning a share of a privately held company. If you started a company or joined a start-up, you might be paid partially in shares. These shares represent partial ownership in the company and might be restricted in some way. Perhaps they might have a window during which they cannot be sold or it might be required that you offer to sell the shares to the company before any outside party can purchase them.

History of stockholder

A stockholder can also be a partial owner in some kind of non-business asset. The asset could take many forms, from mineral rights to a piece of land, to interest in a racing team, to partial ownership of a herd of livestock. Many financial terms that are used today come from agricultural vocabulary. Stock, meaning ownership or the inventory of a business, derives from stock, meaning cattle, swine or sheep.

Financial stockholder

Stock more recently refers to proprietary or ownership shares of a publically traded company. A stock is also called a security or, when referring to the stockholder shares of a group of companies, equities. A share of stock represents fractional ownership and comes with certain privileges, depending on what type of share it is. Common stock, unless otherwise specified, is the share price as quoted in the media. Each common share usually has a vote that can be cast for the board of directors and chairman at the annual meeting.

Types of stock shares

Understanding financial terms helps you better grasp that world.

Common shares are the lowest-priority ownership class and, in the event of a company bankruptcy or liquidation, will be the first to go to zero. Bondholders and preferred stockholders all have a higher priority. Preferred stock is another class of share. As its name suggests, it receives preferential treatment, often having greater voting leverage and sometimes the only voting power. Preferred shares will fare better in a bankruptcy or buyout.

References

• "Merriam Webster"
• "US Securities and Exchange Commission"

Resources

• "Merriam Webster"