01 / 13
What Are Ordinary Shares?
🏢 → 📊 → 👤
Company → Shares → Investor
Ordinary shares are a type of share that represents ownership in a company.
They are commonly used by companies to divide ownership among investors.
When you buy ordinary shares in a company, you become an ordinary
shareholder. Your shares represent an ownership interest in that business.
The number of shares you own determines how much of the company you own
relative to the total number of ordinary shares.
Simple meaning: An ordinary share is a unit of ownership
in a company that can give the shareholder certain rights and potential
financial benefits.
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Why Are They Called “Ordinary” Shares?
📊
Ordinary = Standard form of share ownership
The word “ordinary” does not mean the shares are unimportant.
It is simply the name used to distinguish this type of share from
other classes, such as preference shares.
Ordinary shares generally represent the basic ownership interest
in a company.
For many investors, ordinary shares are the type they first think
about when they hear the word “shares”.
Do not confuse “ordinary” with “low value” or “less important”.
It refers to the class of shares.
03 / 13
How Does an Ordinary Share Represent Ownership?
🏢 Company
→
100% Ownership
→
📊 Shares
Think of a company as having its ownership divided into many small pieces.
Those pieces are represented by shares.
If a company has 1,000,000 ordinary shares and you own 10,000 of them,
your shares represent 1% of those ordinary shares.
Your ownership percentage is therefore connected to the number of shares
you own and the total number of shares.
The share price tells you the market value of one share. Your ownership
percentage depends on how many shares you own.
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A Simple Zambian Example
Imagine You Buy 500 Ordinary Shares
Suppose an ordinary share is trading at K10.
If you buy 500 shares:
500 × K10 = K5,000
Your investment would therefore be K5,000 before any applicable
transaction costs.
You now hold 500 ordinary shares in the company.
Those shares represent your ownership interest.
This is only an educational example. A real share price can change,
and transaction costs may also apply.
05 / 13
Ordinary Shareholders May Have Voting Rights
👥 🗳️ 🏢
Share ownership can include voting rights.
One important feature of ordinary shares is that they may provide
voting rights to shareholders, depending on the company's share
structure and applicable rules.
Voting can allow eligible shareholders to participate in certain
decisions presented to shareholders.
For example, shareholders may vote on matters at a shareholders'
meeting.
Voting rights are connected to the particular class of shares and
the company's governing documents and applicable law.
06 / 13
Ordinary Shares May Pay Dividends
🏢 Company
→
💰 Dividend
→
👤 Shareholder
A company may decide to pay dividends to its shareholders.
A dividend is a payment made to eligible shareholders according to
the company's declared dividend and applicable requirements.
For example, suppose a company declares a dividend of K0.40 per
ordinary share.
If you own 2,000 eligible ordinary shares, the gross dividend would be:
2,000 × K0.40 = K800
The amount actually received can be affected by applicable deductions
and taxes.
A company is not automatically required to pay a dividend every year.
Dividends depend on the company's decisions and applicable rules.
07 / 13
Ordinary Shares Can Increase in Value
K10
→
K15
→
Potential Gain
The market price of an ordinary share can change.
If the price increases after you buy the shares, your investment
may have increased in market value.
For example, imagine you buy 1,000 ordinary shares at K10 each.
Your purchase value is K10,000 before costs.
If the share price later rises to K15, the market value of those
1,000 shares would be K15,000 before costs and taxes.
The K5,000 difference is an unrealised gain if you still own the shares.
The gain becomes realised when you sell, subject to the actual sale
price and applicable costs.
08 / 13
Ordinary Shares Can Also Fall in Value
📈 ↕ 📉
Share prices can move in both directions.
There is no guarantee that ordinary shares will increase in value.
Their market price can fall.
Suppose you buy 1,000 shares at K10 each.
Your investment value is K10,000 before costs.
If the market price later falls to K7, those shares would have a
market value of K7,000.
That would represent a K3,000 decrease in market value before considering
any costs or taxes.
This is why ordinary shares should be treated as investments that
carry risk.
09 / 13
Ordinary Shares and Company Growth
🏢 Business
→
📈 Growth
→
👥 Shareholders
As an ordinary shareholder, you have an ownership interest in a real
business.
If that business grows successfully, increases sales, improves its
profitability or expands its operations, investors may view the company
more positively.
This can potentially support an increase in the market value of its shares.
A good business does not guarantee a rising share price. Share prices
are affected by many factors and can move differently from the company's
short-term business performance.
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Ordinary Shares vs Preference Shares
Ordinary Shares
Usually represent the basic ownership interest in a company.
They may include voting rights, depending on the share class.
Dividends may be declared but are not guaranteed.
Preference Shares
Have different rights and features from ordinary shares.
They may have preferential treatment regarding dividends or capital
in certain circumstances, depending on their terms.
Voting rights can also differ.
The exact rights attached to each class of shares depend on the
company's share structure and applicable rules.
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What Are the Main Benefits of Ordinary Shares?
Ordinary shares can provide several potential benefits to investors.
- Ownership in a company
- Potential capital growth
- Potential dividend income
- Possible voting rights
- Participation in the long-term success of a business
📊 + 💰 + 🗳️
Ownership + Potential Return + Possible Voting Rights
These are potential benefits, not promises. Ordinary shares also carry
investment risk.
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What Should a Beginner Check Before Buying?
Before buying ordinary shares, do not look only at the share price.
Try to understand the company behind the share.
- What does the company actually do?
- How does the company make money?
- How has the business performed?
- Does the company have significant debt?
- Has it paid dividends in the past?
- What risks could affect the business?
- Does the investment match your financial goal?
Think like an owner: If you would not understand
the business, take time to learn about it before investing.
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🎓
Lesson Complete!
Well done! You now understand the basic idea of ordinary shares.
You have learned that ordinary shares represent ownership in a company,
and that ordinary shareholders may have voting rights and may potentially
receive dividends or benefit from an increase in share value.
You have also learned the most important point: ordinary shares can
lose value, so investing always involves risk.
Key message:
An ordinary share represents an ownership interest in a company.
Understand the business, understand the risks and invest based on
your own informed decision.
