Preferred stock Preferred stocks are also ownership shares issued by a company and traded by investors, but they differ from common stock in several ways which reduce investor risk but also limit investor reward. The amount of the dividend is guaranteed and paid before that on common stock. But the dividend isn't increased if the company profits and the stock price increases more slowly. The term is used for the stocks of the largest, most valuable and consistently profitable companies. Stock splits Investors can be put off a stock if the price gets too high, but the company still needs to raise investment capital.
Companies then have the option of splitting the stock to lower the price and stimulate trading.
When a stock is split, there are more shares available but their overall value is the same. An investor who owned 300 shares at 100 now has 600 at 50, but the total is still worth 30,000. In a reverse split you exchange more stocks for fewer and the price of the stock increases accordingly. This discourages small investors and attracts large, institutional investors who put a minimum value on any stocks they may consider buying. Typically, the road to public ownership starts with an entrepreneur who comes up with an idea for a business and raises enough money to start it up.