Common Stock

  • A class of ownership that has lower claims on earnings and assets than Preferred Stock. It is riskier to own common stock because in the event of Liquidation, common stock shareholders are the last to claim rights to assets.2
  • A unit of ownership of a corporation. In the case of a public company, the stock is traded between investors on various exchanges. Owners of common stock are typically entitled to vote on the selection of directors and other important events and in some cases receive dividends on their holdings. Investors who purchase common stock hope that the stock price will increase so the value of their investment will appreciate. Common stock offers no performance guarantees. Additionally, in the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock.3
  • This term represents a constituent in corporate ownership. People who own shares of common stock (common stockholders) often have voting rights in their company’s decision-making matters and executive board of elections.  Through company dividends and capital appreciation of corporate assets, common stockholders can also share in their company’s financial success.4

Related Terms

Treasury Stock | Redeemable Preferred Stock | Series A Preferred Stock

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