Common stock

The US Securities and Exchange Commission (SEC) describes a share as an ownership interest in a company. That does not mean you can take the same percentage of its cash, machinery or bitcoin (abbreviated BTC here) as your percentage of shares. The company owns its assets; shareholders hold rights under their particular class, not unrestricted access to individual assets. A class is a group of shares with specified terms, such as voting or payments. An interest in profits does not mean accounting earnings are continuously paid out to you. The company may need funds for operations or investment. Read corporate ownership through share rights, not as personal ownership of the company’s wallet. [1]

Our model has 100 A shares with one vote each and 10 B shares with ten votes each; economic rights per share are equal. A shares represent 100/110 = 90.91% of economic participation but only 100/200 = 50% of votes. The SEC discusses such differences in dual-class structures, arrangements with different share classes. An investor may therefore own a large economic stake without corresponding control. Check the class and its transfer rules, since voting rights can change too. Knowing the ticker, the short exchange symbol, or the quantity in your account is not enough. [2]

In the US, the SEC describes arrangements including street name and DRS. Under street name, an intermediary appears in the shareholder register of the issuer, the company issuing the shares. Your broker, the firm handling securities trades, records you as the beneficial owner: you hold the rights and economic benefits of the shares. Under DRS, the direct registration system, your name appears directly on the issuer’s records maintained by its transfer agent. Not every issuer offers this option. Voting instructions, communications and sales can therefore follow different paths, although both arrangements can be electronic. DRS is not bitcoin self-custody. With self-custody you manage private keys, secret data used to sign payments; DRS remains a record of rights in a company. Direct registration does not guarantee an instant sale either. Find out how you will exercise your rights before choosing an arrangement. [3]

In the following examples, all monetary amounts are in US dollars (USD) unless explicitly stated in BTC. In our example, 10 existing shares sell for 40 USD each. The 400 goes from buyer to seller before fees; the company receives no new money. A new issue of 10 shares at 40 each with total costs of 10 is different: it brings the company 390 and increases the original 100 shares to 110. A holder of an original 10 shares now owns 10/110 = 9.09% rather than 10%. Distinguish a primary issuance, new shares issued by the company, from a secondary sale between owners. Buying on the exchange usually pays the seller, not a new corporate bitcoin purchase. [2]

The record date determines who is eligible for the declared dividend. The ex-dividend date is when the share starts trading without entitlement to that payment; exact rules depend on the market and dividend type. The example uses both a price and dividend per share. A dividend requires the relevant decision and eligibility under the applicable dates. Holding common shares alone does not guarantee one. Our simple model starts with a price of 50 USD, pays a dividend of 2 and has a subsequent price of 48. The sum 48+2 = 50 means zero total return before tax and costs, not extra profit. In reality other news, supply and demand affect prices too; an exact dividend-sized decline is not guaranteed. Corporate accounting profit, a paid dividend and your total holding return are different things. Consider the payment together with the value you retain. [4]

Liquidation settles the assets and obligations of a company being wound up. Common shareholders rank after creditors and applicable preferential rights. Our simplified liquidation model has assets of 100 USD, liabilities of 70 and a preferred-shareholder claim of 40. Paying creditors leaves 30, not enough even for the preference. Nothing remains for common stock. The model omits other costs and classes but shows the meaning of a residual claim. Even a positive trading price does not itself guarantee a payment when the company is wound up. Priority cannot create missing assets. [1]

The company in our example owns 100 BTC and has issued 100 common shares, giving gross holdings of 1 BTC per share. It uses proceeds from issuing preferred shares to buy another 20 BTC without adding common shares: the gross ratio is 120/100 = 1.2. Those preferred shares also create a fixed dollar claim ranking before common shares, equivalent to 20 BTC at the same valuation. With no other assets or claims, the model’s residual value for common shareholders is again 100 BTC before costs. This is a simplified valuation, not a withdrawal of bitcoin from the company. Nor does it define Net BPS, net Bitcoin Per Share: this corporate measure depends on specified deductions. Strategy, a company with bitcoin reserves, therefore publishes its own definitions. The ratio does not give you keys to the reserve, and the share price can differ substantially from its value. [5]

Our model has 200 shares authorised, 120 issued and 20 held by the company itself; 100 remain outstanding. Unused permission to issue shares is not an existing ownership interest. Nor are all issued shares the same as shares held outside the company. For EPS, earnings per share, the international accounting standard IAS 33 uses a time-weighted average and separate dilution rules for possible new shares. It does not automatically take any one of these counts. In SEC EDGAR, the public US regulatory filings database, check the date, classes, treasury shares, conversions and exact basis of the published ratio. [6] [7]