"Young man, why are you back again?"
"Didn't I tell you not to buy stocks these next few days, and to save the money to buy new shares?"
Upon seeing Jiang Fei, the woman selling tea eggs recognized him immediately.
Thinking he had returned to buy stocks, I kindly offered him a reminder.
Chen Dong smiled and replied.
"Auntie, we're not here to buy stocks. Didn't you say that new shares are about to be issued? We don't know much about this. We just heard that it's very profitable, so we wanted to ask what's going on?"
Hearing this, the woman looked Chen Dong up and down and said smugly.
"Then you've come to the right person. Don't underestimate me just because I'm a tea egg seller. When it comes to stocks, I'm practically an expert."
"Just by looking at you, Auntie, I can tell you're an expert in this field!"
Chen Dong started by flattering him. Then, he steered the conversation towards stocks.
"I heard from a friend that Shenzhen Development Bank stock is good, so I came to Shenzhen to buy a few shares to hold. But just now, my aunt told us not to buy any stocks yet. What's going on?"
“Your friend is right. Shenzhen Development Bank is indeed a good stock. It pays dividends every year, and even its stock price has doubled.”
As she spoke, the older woman smiled meaningfully and asked a question.
"Young men, I can tell you don't understand, so I'll explain it to you properly today."
"You all know that stocks make money, but do you know why they make money?"
Upon hearing this, the group shook their heads in unison.
The three of them genuinely didn't understand, while Chen Dong was just trying to agree with the older woman.
Seeing the expressions on their faces, the older woman grinned and said.
“I remember that last year Shenzhen Development Bank’s dividend was 7 yuan per share. When I bought it, it was only 20 yuan per share. The dividend accounted for more than a third of the total, which is much higher than bank interest.”
"Moreover, stocks are like hens that lay eggs; the number of shares changes every year. Last year alone, they doubled."
"Can everyone please stop fighting over it?"
Upon hearing this, Chen Dong nodded, affirming the old lady's statement, which was indeed the essence of stocks.
With only a limited number of shares available, the increased demand will inevitably drive up the price.
Once prices rise, it creates a profit-making effect, attracting even more people to rush to buy.
Essentially, this is a virtuous cycle that benefits both shareholders and listed companies.
That's how early stock prices rose.
"Auntie, isn't this great?"
Chen Dong pretended not to understand and continued to try to get information out of him.
As soon as he finished speaking, the woman became flustered, and her words became somewhat incoherent.
"I didn't say it was bad. How should I put it? What I mean is, Shenzhen Development Bank shares are now 80 yuan each, several times the price of what I bought before, and the new shares have only just been issued..."
However, Chen Dong still understood.
Even without the memories of later generations, he would still think the same way.
Take, for example, 1987, when someone spent 300 yuan to buy 15 shares of Shenzhen Development Bank stock.
In 1988, each share paid a dividend of 2 yuan, so 15 shares would have paid 30 yuan.
Total number of shares: 15; Total dividends: 30 yuan.
In 1989, the company issued 1 bonus share for every 2 shares held, and 1 rights share for every 2 shares held, with a dividend of 7 yuan per share (rights share price of 40 yuan).
Bonus shares: 7 shares will be issued. Rights issue: 7 shares will be issued for an investment of 280 yuan.
Total number of shares: 29; total dividends: RMB 105.
Over the two years combined, the total dividends amounted to 135 yuan, and the total rights issue amounted to 280 yuan.
In other words, I initially spent 300 yuan to buy 15 shares of Shenzhen Development Bank stock, and then spent another 280-135=145 yuan when the rights issue was held, for a total of 445 yuan to buy the stock.
However, the number of shares obtained has reached 29.
According to the woman, at that time, each share of Shenzhen Development Bank was priced at 80 yuan, so 29 shares would be 2320 yuan.
In two years, an investment of 445 yuan can yield a net profit of 1875 yuan.
The initial investment of 445 yuan has increased fivefold.
With this analysis, the old lady's meaning becomes easier to understand.
It's like climbing a mountain. You start fast and climb upwards, but the speed decreases as you go.
Similarly, from one dollar to one hundred dollars, it increases a hundredfold.
The increase from ten yuan to one hundred yuan is only tenfold, just like a stock investor who pays a high price to enter the market halfway through.
Can a hundred times and ten times be the same?
New stocks are different!
No, it should be called original shares!
At this time, the stock exchange was not yet open for business, and the new shares issued by listed companies were actually the earliest original shares.
For those who bought initial public offering (IPO) shares, the probability of losing money is probably lower than winning a multi-million dollar lottery prize.
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