What Is a Share and How Does Owning One Work?
A share is one of the most fundamental building blocks of investing. Here's what it actually means to own a share and how the process works in the UK.
The Basics: What Is a Share?
A share — also called a stock or equity — represents a unit of ownership in a company. When a company wants to raise money to grow its business, one way it can do so is by selling ownership stakes to the public through a process called a stock market listing or Initial Public Offering (IPO). Each small unit of ownership it sells is called a share. If a company has issued 100 million shares and you own 1 million of them, you own 1 per cent of that company.
What Do You Actually Get When You Own a Share?
Owning shares in a company gives you several rights and potential benefits. You are entitled to a proportional share of any dividends the company declares — cash payments distributed from profits to shareholders. You have the right to vote at the company's Annual General Meeting on matters including the election of directors and major corporate decisions. You benefit if the company grows in value and the share price rises. And in the event the company is sold or taken private, shareholders receive their proportional share of the proceeds.
However, you also bear the downside: if the company performs poorly, its share price falls, reducing your investment value. If the company goes bankrupt, ordinary shareholders are last in line to receive any remaining assets — after employees, tax authorities, bondholders, and other creditors have been paid. In most company failures, shareholders receive nothing.
How Shares Are Bought and Sold
In the UK, shares in publicly listed companies are bought and sold on stock exchanges — primarily the London Stock Exchange (LSE) for UK companies, though many UK investors also buy shares listed on US exchanges like the NYSE and Nasdaq. Trading happens through brokers — in the modern era, this means investment platforms like Hargreaves Lansdown, AJ Bell, Trading 212, or Freetrade. You place a buy order through your platform, specifying the company and the amount you want to invest or number of shares you want to buy. The platform routes your order to the exchange and your shares are held in your account electronically.
The Bid-Ask Spread
When you look at a share price, you will typically see two prices: the bid price (the highest price a buyer is currently willing to pay) and the ask or offer price (the lowest price a seller is currently willing to accept). When you buy a share, you pay the ask price. When you sell, you receive the bid price. The difference between these two prices is the spread, and it represents a small cost to you as a trader. Spreads are narrowest for frequently traded large-cap shares and wider for less liquid small-cap companies.
Ordinary Shares vs Preference Shares
Most retail investors buy ordinary shares, which carry full voting rights and a claim on dividends after preference shareholders have been paid. Preference shares pay a fixed dividend with priority over ordinary dividends but typically do not carry voting rights. Some companies also issue different classes of ordinary shares — for instance, founders' shares with multiple votes per share that allow founders to maintain control even with a minority economic stake.
Shares Within Your ISA
Individual shares can be held within a Stocks and Shares ISA, sheltering any capital gains and dividends from UK tax. Most major UK platforms allow you to buy UK-listed shares within your ISA. US and other international shares can also typically be held in a UK ISA, though currency conversion charges apply. Holding individual shares within your ISA wrapper is important for tax efficiency, particularly as CGT allowances have been cut significantly in recent years.
