Why buy stock of a company instead of the holding company who has more than 99% of the stocks
In a situation like this, I presume you'd invest in the child company if you thought that the child company would increase in value at a higher rate than the parent. You'd invest in the parent company if you thought the parent company would perform well as a whole, but you did not want to assume the risk of an individual company underneath it. Say the child company is worth 100 million, and the parent company is worth 500 million. You've invested a sum of money in the child company. The child company performs very well, and increases in value by, say, 20 million. As the parent company owns the child, we could say it also increases in value by roughly 20 million. The difference is proportional - Your investment in the child sees a 20% gain in value, whereas your investment in the parent sees a 4% gain in total value, as in this example the parent company, which owns nearly 100% of the child company, is worth 5x more and thus proportionally sees 1/5 the increase in value, due to it being worth more as a whole. Think of it similarly to a mutual fund or ETF that invests in many different stocks on the market. As the market does well, that mutual fund or ETF does well, too.  As the mutual fund is made up of many individual stocks, one stock performing very well, say at a 10-20% increase in value, does not raise the value of the ETF or mutual fund by 10-20%. The etf / mutual fund will perform slightly better (Assuming all other components remain equal for this example), but only proportionally to the fraction of it that's made up of the stock that's performing well. Also VW has more brands, i.e. is more diversified This isn't necessarily a good thing for investing.  It makes the company less likely to go down, but it limits your portfolio.  For example, say you think that Hyundai is a good alternative to Volkswagen (VW) but really like Audi.  If you buy VW, you get some Audi but a lot more of the rest of VW.  Then if you bought Hyundai, you'd be overrepresented in that segment of the market.   Audi may not be structured uniquely, but it is still the only company selling Audi brand cars.  Perhaps someone thinks that those models will do well.  That person may think that Audi will do exceptionally well in its niche.   Having many brands isn't necessarily great.  General Motors had something like sixteen brands before declaring bankruptcy.  It only has twelve now.   Now, it sounds like you feel the opposite about it.  You don't particularly like Audi as a stock and like VW better.  Your reasons sound perfectly reasonable (I know little about either company).  It may even be that VW is the only one buying Audi stock, because everyone else has the same view as you.
You'll own whatever fraction you bought. To own the company (as in, boolean - yes or no) you need to buy 100% of the outstanding stock. RE controlling the company, in general the answer is yes - although the mechanism for this might not be so straight forward (ie. you may have to appoint board members and may only be able to do so at pre-set intervals) and there may be conditions in the company charter designed to stop this happening. Depending on your jurisdiction certain ownership percentages can also trigger the need to do certain things so you may not be able to just buy 50% - in Australia when you reach 20% ownership you have to launch a formal takeover bid. Depends on the structure of the company and what shares are outstanding.  If the pink sheet stock has no voting power then buying all that stock doesn't get you any control at all.  On the other hand, if the outstanding shares only represent 20% of the company's overall shares, then buying all the shares isn't likely enough to have a controlling interest. Thus, you'll have to dig into the details.  If you want an example of where I'd have my doubts, look at Nestle's stock which has the ticker of NSRGY.  There can be companies that are structured with stock on multiple exchanges that can also be a challenge at times.  There is also something to be said if you own enough stock in a company that this has to be disclosed to the SEC when you buy more. A company generally sells a portion of its ownership in an IPO, with  existing investors retaining some ownership.  In your example, they believe that the entire company is worth $25MM, so in order to raise $3MM it is issuing stock representing 12% of the ownership stake (3/25), which dilutes some or all of the existing stockholders' claims. Shareholders can [often] vote for management to pay dividends Shareholders are sticking around if they feel the company will be more valuable in the future, and if the company is a target for being bought out. Greater fool theory When you buy a stock, the worst case scenario is that it drops to 0.  Therefore, the most you can lose when buying a stock is 100% of your investment. When you short a stock, however, there's no limit on how high the stock can go.  If you short a stock at 10, and it goes up to 30, then you've lost 200% on your investment.  Therefore shorting stocks is riskier than buying stocks, since you can lose more than 100% of your investment when shorting. because the price might go up, but it will never be as big of a change as a regular price drop i suppose... That is not true.  Stocks can sometimes go up significantly (50-100% or more) in a very short amount of time on a positive news release (such as an earnings or a buyout announcement).  A famous example occurred in 2008, when Volkswagen stock quintupled (went up 400%) in less than 2 days on some corporate news: Porsche, for some reason, wants to control Volkswagen, and by building up its stake has driven up the price. Hedge funds, figuring the share price would fall as soon as Porsche got control and stopped buying, sold a lot of VW shares short. Then last weekend, Porsche disclosed that it owned 42.6 percent of the stock and had acquired options for another 31.5 percent. It said it wanted to go to 75 percent. The result: instant short-squeeze. The German state of Lower Saxony owns a 20 percent stake in VW, which it said it would not sell. That left precious few shares available for anyone else. The shorts scrambled to cover, and the price leaped from about €200, or about $265, to above €1,000. Something to consider is that in the case of the company you chose, on the OTC market, that stock is thinly traded and with such low volume, it can be easy for it to fluctuate greatly to have trades occur.  This is why volume can matter for some people when it comes to buying shares. Some OTC stocks may have really low volume and thus may have bigger swings than other stocks that have higher volume. "The answer to your question has to do with the an explanation of ""shares authorized, issued and outstanding."" Companies, in their Articles of Incorporation, specify a maximum number of shares they are authorized to issue. For example purposes let's assume Facebook is authorized to issue 100 shares. Let's pretend they have actually issued 75 shares, but only 50 are outstanding (aka Float, i.e. freely trading stock in the market) and stock options total 25 shares. So if someone owns 1 share, what percentage of Facebook do they own? You might think 1/100, or 1%; you might think 1/75, or 1.3%; or you might think 1/50, or 2%.  2% is the answer, but only on a NON-diluted basis. So today someone who owns 1 share owns 2% of Facebook. Tomorrow Facebook announces they just issued 15 shares to Whatsapp to buy the company.  Now there are 65 shares outstanding and 90 issued. Now someone who owns 1 share of Facebook own only 1/65, or 1.5% (down from 2%)! P.S. ""Valuation"" can be thought of as the price of the stock at the time of the purchase announcement." I was looking at NAT and NAO, NAT owns 20% of NAO.  They trade opposite each other on the price of oil, low is good for NAT, bad for NAO.  In bad times the other company's stock would probably rise, so they could trim excess shares to keep a stable monetary holding.  This would create cash in bad times, in good times they could buy more, creating a floor as well for the other. A share of stock is a small fraction of the ownership of the company. If you expect the company to eventually be of interest to someone who wants to engineer a merger or takeover, it's worth whatever someone is willing to pay to help make that happen or keep it from happening. Which means it will almost always track the company's value to some degree, because the company itself will buy back shares when it can if they get too cheap, to protect itself from takeover. It may also start paying dividends at a later date. You may also value being able to vote on the company's actions. Including whether it should offer a dividend or reinvest that money in the company. Basically, you would want to own that share -- or not -- for the same reasons you would want to own a piece of that business. Because that's exactly what it is. 1 reason is  Leverage.... If you are buying out of the money options you get much more bang for your buck if the stock moves in your favor.  The flipside is it is much more likely that you would lose all of your investment. Shares are partial ownership of the company. A company can issue (not create) more of the shares it owns at any time, to anyone, at any price -- subject to antitrust and similar regulations. If they wanted to, for example, flat-out give 10% of their retained interest to charity, they could do so. It shouldn't substantially affect the stock's trading for others unless there's a completely irrational demand for shares. Another benefit of holding shares longer was just pointed out in another question: donating appreciated shares to a nonprofit may avoid the capital gains tax on those shares, which is a bigger savings the more those shares have gone up since purchase. There are a few reasons, dependent on the location of the company.  The first, as you mentioned is that it means that the employee is invested in the companies success - in theory this should motivate the employee to work hard in order to increase the value of their holdings. Sometimes these have a vestment period which requires that they hold the stock for a certain amount of time before they are able to sell, and that they continue working at the company for a certain amount of time. The second, is that unlike cash, providing stocks doesn't come out of the companies liquid cash. While it is still an expense and does devalue the shares of other shareholders, it doesn't effect the daily working capital which is important to maintain to ensure business continuity. And the third, and this is for the employee, is tax reasons. In particular for substantial amounts. Of course this is dependent on jurisdiction but you can often achieve lower tax rates on receiving shares vs a cash equivalent sum, as you can draw out the money over time lowering your tax obligation each year, or other methods which aren't possible to look into now. Hope this helps. First, the stock does represent a share of ownership and if you have a different interpretation I'd like to see proof of that. Secondly, when the IPO or secondary offering happened that put those shares into the market int he first place, the company did receive proceeds from selling those shares. While others may profit afterward, it is worth noting that more than a few companies will have secondary offerings, convertible debt, incentive stock options and restricted stock that may be used down the road that are all dependent upon the current trading share price in terms of how useful these can be used to fund operations, pay executives and so forth. Third, if someone buys up enough shares of the company then they gain control of the company which while you aren't mentioning this case, it is something to note as some individuals buy stock so that they can take over the company which happens. Usually this has more of an overall plan but the idea here is that getting that 50%+1 control of the company's voting shares are an important piece to things here. Because people bought their shares under the premise that they would make more money and if the company completely lied about that they will be subject to several civil and criminal violations. If people didn't believe the company was going to make more money, they would have valued their shares lower during the IPO by not forming much of a market at all.