Business news at 9pm

A sneak peek into stocks

News presenter: "Dow Jones’ average opened at 10% higher this morning, Tesla Inc. gained 20% after they released their third quarter earning report. Also, Facebook lost 15% percent on the market today after a report of an office scandal broke…"

There is nothing as boring as having to listen to Business News in the evenings with all the graphs and numbers. But if you grew up with a father like mine, you had to hang around in the sitting room and pretend as if you understood what you were watching on TV because you needed to ask him for pocket money immediately the news ended; or probably, your favourite TV show always came up after that news.

I took that mentality from my childhood up until last year when I decided to learn about what those numbers meant, and I must confess, it was an adventure into a different universe. Learning about these esoteric figures was so much fun that I became an ardent follower of Business News because by then I knew what the numbers and strange terms meant. As the sweet boy “wey no dey hoard knowledge like palliative”, I decided to dedicate my next two posts to talking about these arcane things. So ladies and gentlemen, shall we?

First of all, the common buzz word you’ll hear in the business world is the stock market. What is the stock market?

In simple terms, the stock market is a place where people buy and sell shares. Ough! Another buzz word, right? I will explain it in a moment. Imagine you have a round pizza that has been divided into six equal parts. One part represents one share, so the six parts means six shares. If the pizza were a company, that means it has six shares with each piece of the pizza representing a share. A company like Amazon for example, as of 2020 had over 510 million shares held by investors.

I’d like you to note also, that in the business world, there are two types of companies: private companies and public companies. Just like the name implies, the private companies are companies whose shares are held by private investors and those shares aren't available to the general public to buy. A public company on the other hand, allows the general public to own part of its shares. Sometimes, you hear a statement like, "This company is going public." It means that the company is in the process of becoming a public one (allowing people to buy its shares) after it had once been a private company.

Now that you’ve understood the concept of shares, why do people buy and sell shares and how do they make money from it? Going back to the pizza example, let's assume you were one of the investors that bought one of the shares of the "pizza company" when they went public and you bought it at ₦100 per one unit of shares. Three weeks after you bought, news suddenly broke that pizza has special ingredients which make people live up to 100 years. The demand for pizza shares rose, there were people willing to pay up to ₦500 naira per share. After much thought, you decided to sell for that price. Now, you have made ₦400 profit just because you bought the pizza share before the price rose. If you happen to be watching business news the day the price of pizza rose, you might hear something like, "Following the discovery of new and wonderful ingredient in pizza, the shares of the pizza company rose by over 400% on the stock market today." Simple right? Now, imagine again that after you sold your share for ₦500, the news of the special ingredient turned out to be false. Seeing that what he bought was worthless, the person who bought the shares from you decided to sell, but there was no willing buyer at the price he wanted which was ₦500. He then had to sell for ₦200 thereby incurring a loss of ₦300. That evening you might hear something like this, "The shares of pizza company fell by 300% following the ground breaking investigation that revealed that the pizza had no special ingredients."

That's how shares work. You buy them and you hope they go up (appreciate) so that you can sell at a profit. Very interesting right? I hope you are now getting a grasp of business news.

I will stop here for today and continue next week.

P.S: As at March 2020, the price of one share in Jumia Inc, was $2, as of the time of writing this, it is $61.

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If you have any questions, ask in the comment section. I will be waiting with load of answers for you🤗🤗