Stock

Where did that word come from?  Who decided to call ownership share of a company-STOCK?

Well, being the scientist researcher type, I Googled it.  It seems the word Stock comes from the old English word-stoc. (makes sense, huh)

The word “STOCK” was initially used to describe the trunk of a tree.  The word also seems to be used for many wooden objects-such as the stock of a gun, and stocks used in sailing-which makes sense considering the word origin.

Many non-English speakers complain about the difficulty learning English because our words can have so many meanings-so let’s look at  other uses of the word, Stock-which in 1889 Century Dictionary had 22 different meanings.

The farmer has stock on the north 40.  Could be cows, horses or sheep-but is still stock.  He takes them to the Stock-yard to sell.

The grocer stocks his shelves with canned goods.

He may take stock of his losses.

The plant/zooology world, uses stock as a source of material such as root-stock, or genetic-stock.  And I could go on, 22 different ways, but I will save you that.

So how did stock become known as a SHARE of a corporation?

Well it seems that in the middle ages, if one loaned the government funds, a stick was notched in a pattern to represent how much you gave them.  The stick was then broken in such a way that you had a matching pattern of notches, as did the government.

So when you presented it later for repayment, you were acknowledged to be owed that amount back.   Your stick was known as a stock, and the government’s half of the notched stick was the “counter-stock”.

Over time the use of stock as representing “ownership shares” of a company or corporation became common.

So how does the word, stock, translate into what we consider publicly traded stocks and the stock market or stock exchange?

Because of tax, and liability reasons, many businesses incorporate.  When a company incorporates, the company is divided into shares.  The owner may own all of the shares, called stock, or sell/give stock shares to a partner, family, friends and co-workers.  The stock-holders can be given a portion of the profits of the company-which would be called dividends.

Companies that want to sell shares to you and me, are considered “going public”.  A company that wants to go public, must go through an initial public offering or IPO.  This is an expensive process that requires lawyers, investment bankers, and numerous regulatory processes.

Where did Stock Exchanges come from?

Stock markets or exchanges have been around for centuries.  The intial stock exchanges were found in France, trading agricultural products.  The Dutch were the first companies to divide themselves into multiple “shareholders”.  And England was the site of the first true company stock exchange-with The Dutch East India Company being the first traded stock.

Having begun as gentlemen clubs, with brokers smoking their cigars and trading stocks-the exchanges themselves, such as the New York Stock Exchange, and NASDAQ are now billion dollar companies.  Stock trading, that started out as an agreement to exchange one or two shares a day, is now trillions of shares changing hands every day, all over the world.

Wikepedia has the list of the world stock exchanges.

In a future post, we will take the Purple Haze Condom Company public, to help you understand the process.  I know you can’t wait.