Episode Summary When you buy a stock, what do you actually buy? You cannot walk into a bank branch and walk out with one of their office chairs, nor can you demand your share of the cash in their vault. In fact, the company legally owes you nothing and can stop paying dividends tomorrow. This episode kicks off our equities season by looking at what a common share actually is, the powerful legal innovation of limited liability that makes stock markets possible, and how corporate debt acts as an amplifier for your returns.

Key Concepts

• The Residual Claim: Shareholders sit at the very back of the corporate insolvency queue, behind secured lenders, bondholders, subordinated debt, and preferred shares. In a corporate failure, you often get nothing. Ho ...