What is a Public Company?

A company is considered public when it lists securities on stock exchanges or in the over-the-counter market. The following are considered securities: shares, subscription bonds, debentures, promissory notes for public distribution.

Why do companies open their capital?

As they grow, companies need money to finance their investment projects. One of the ways to get these resources is by becoming a public company. By raising capital in this way, companies obtain a source of permanent funding.

Stock market

What are shares?

A share is a fraction of the capital stock of a company. With one or more fractions of the company, you become a partner in it. Shares are marketable securities that represent, for whoever owns them, a fraction of the capital stock of a company.

What types of shares exist?

Shares can be: - Ordinary (ON): these give voting rights at the company’s general meetings; - Preferred (PN): these give preference for receiving dividends or reimbursement of capital in the case of liquidation of the company. However, these shares do not give voting rights or restrict them. The preferred shares may also be differentiated by classes: A, B, C or some other letter that may appear after the “PN”. The characteristics of each class shall be established by the company issuing the shares, in its bylaws.

The EBX Group companies with shares that trade on the stock exchange only have ordinary (ON) shares because they are listed on the Novo Mercado (“New Market”), which requires the highest level of corporate governance.

Tips

How to choose shares?

This is the most important step in the decision to invest because it will be necessary to assess the company’s prospects in relation to your expectations. It is important to assess the state and prospects of the economy and the financial markets, the earning potential of enterprises and the amount of trades conducted (liquidity of assets). The brokerage firm chosen also has the role not only of carrying out orders but also of assisting in the investment decision.

Types of Investor

It is important to note that the stock market itself brings components of risk due to the daily pressures that occur in the pricing of shares. Thus, within this universe, the investor must decide where his investment profile fits: conservative, moderate, or aggressive.

Conservative investors are averse to risk. They demand a stable portfolio, with a view to increasing the equity invested. The shares sought by conservative profile investors have low volatility, i.e. below the oscillations of the market as a whole, and a return on investment horizon of medium to long-term.

Moderate investors have greater propensity to risk, but want to keep within market swings. Their stock portfolio seeks to mix shares in large companies with other smaller companies with less liquidity. This investor has a return horizon that is medium to long-term as well.

The aggressive profile includes those investors willing to accept risks, aware that high returns in the short to medium term imply larger swings in share prices and greater likelihood of losses. They use “leverage”and/or financial instruments for increased returns, as an extra factor in their portfolio and consequently greater risk. They seek short-term returns in their shares that exceed other capital market indicators.

It is worth mentioning, for any type of investor, that the fact that a share has prduced returns in the past does not represent a guarantee of similar returns in the future.

Types of Analysis

Fundamental analysis: takes into account macroeconomic and sector fundamentals concerning a given company to determine the “fair price” of a share in that company.

Technical or Graphic analysis: takes into account, at the time of trading, the graph of the profile of share behavior to determine the best moments for buying and selling of stocks. The Technical or Graphic school accepts the assumption that the future can be predicted based on what occurred in the past.

Risks

Shares are variable-income assets, i.e. they cannot ensure the investor a predicted return on investment or profit. This is why an investment is considered a risk.

Investor profitability consists of dividends or interest in the profits and benefits granted by the issuer, in addition to any capital gain arising from the sale of shares on the secondary market (stock exchange). The return on investment depends on a number of factors, such as the company’s performance, behavior of the Brazilian and international economies, etc.

For this reason, it is advisable that the investor does not depend on the sum invested in shares for immediate expenses and that he or she has a medium to long term investment horizon during which possible share devaluations may occur.