Lecture 1 (Chapter 1). What is share and why company's size matters?

Imagine a company like Shoprite, South Africa's biggest supermarket group. It didn't start big: it grew by opening more stores, hiring more people, selling more groceries. At some point, growing further needed more money than the company had in the bank.

So Shoprite did what thousands of companies do: it sold small pieces of itself to the public. Each piece is called a share (or "stock" or "equity" - the same thing).

Owning a share means owning a small piece of the company itself.

Buy one share of Shoprite, and you technically own a tiny fraction of every store, every till, every truck in its delivery fleet. You share in the profits (through dividends) and in the losses. If Shoprite has a great year, your share is usually worth more. If Shoprite has a bad year, it's usually worth less.

Why would a company sell pieces of itself?

Because it needs capital: money to expand, build new stores, buy equipment without going deeper into debt. In exchange for that money, the company gives up part ownership to whoever buys the shares.

Why would you want to buy one?

Two main reasons:

1. Dividends - many companies pay shareholders a portion of profits, usually a few times a year. (We'll cover this properly in Lesson 5.)
2. Capital growth - if the company grows and becomes more valuable, so does your share, and you can sell it for more than you paid.

Where do you actually buy a share?

You can't just walk into Shoprite's head office and ask to buy a piece of it. Shares are bought and sold on a stock exchange. In South Africa, that's the JSE (Johannesburg Stock Exchange), which we'll unpack in Lesson 2. To access it, you need a licensed broker - a company authorised to place your buy and sell orders on the exchange. We'll get to real, licensed options later in this course.

One thing to get straight from the start: owning a share is not a lottery ticket and not a guaranteed win. It's real, partial ownership of a real business, which means its value moves with how that business actually performs over time, not on luck. That mindset is the foundation for everything else in this course.

Not all companies are the same size and size changes the risk/reward picture

Companies are commonly grouped by market capitalisation (market cap) — the total value of all their shares combined (share price × number of shares in issue):

• Large-cap - the biggest, most established companies (think Naspers, Standard Bank, Shoprite). Generally more stable, more liquid (easy to buy and sell without moving the price much), and more closely watched by analysts. Growth tends to be steadier but slower — a company already worth hundreds of billions of rand can't double in size overnight.
• Mid-cap - solid, medium-sized companies that have outgrown the small-cap stage but aren't yet market giants. Often a middle ground: more growth potential than large-caps, with somewhat more stability than small-caps.
• Small-cap - smaller listed companies. These can grow much faster percentage-wise than large companies, but they're also more volatile, less liquid (fewer buyers/sellers, so prices can swing harder), and typically less covered by analysts — meaning less publicly available research to lean on.
• Micro-cap - the smallest listed companies on the exchange. Highest growth potential in percentage terms, but also the highest risk: lower liquidity, less financial history, and greater sensitivity to bad news or a single lost contract. Some micro-caps thrive; many don't survive long-term.

The general pattern: as you move from large-cap toward micro-cap, potential reward goes up and so does risk and unpredictability. Neither end is "better." It depends on your own risk tolerance and time horizon, something we'll cover properly in Chapter 2.