Common Stock Explained: Rights, Privileges, and Investing

Common stock is a type of security that represents ownership in a company. It's the most common type of stock and is often considered the backbone of a company's financial structure.

When you buy common stock, you're essentially buying a small piece of the company. You become a shareholder and have a claim on a portion of the company's assets and profits.

As a shareholder, you have the right to vote on important company matters, such as electing the board of directors and approving major business decisions. This is a key privilege of owning common stock.

The value of your common stock can fluctuate based on the company's performance and overall market conditions. This means that the value of your investment can go up or down over time.

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Common stock represents ownership of equity in a company, giving holders the right to claim a share in the company's profits. It's also known as common share, ordinary share, or voting share.

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Holders of common stock own the rights to elect the corporation's board of directors and vote on mergers. This gives them a level of control over the company.

Common stock owners can participate in the company's growth and profit from the capital appreciation of the securities. On average, common shares offer a higher return relative to preferred stock or bonds.

However, the higher returns come with the higher risks associated with such securities. Common stockholders are last in line to receive money if a corporation is dissolved.

Here are some key rights and responsibilities of common stockholders:

As a shareholder, you have a say in the company's decisions and can benefit from its profits. You have the right to vote on directors, officers, compensation plans, and major business actions such as acquisition or dissolution.

You can also submit and vote on proposals to amend the bylaws or mandate actions by the board. Pre-emption rights and shareholder rights plans regulate the terms under which new shareholders can affect the interests of existing ones.

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Shareholders have the right to request access to the company's financial records, the list of shareholders, and other records that they legitimately require to fulfill their ownership duties.

Common stockholders are partial owners of the company and have some control over business decisions. The more shares you own, the more of the company you own and the further your vote on company-related issues goes.

As an owner of the company, you have many rights, including the right to your pro-rata share of dividends, the right to vote for the Board of Directors, and the right to maintain proportionate ownership.

The right to transfer ownership means you can buy and sell common stock freely, although there are some exceptions with unregistered (restricted) stock.

Here are the main shareholder rights:

You can also exercise your right to vote on issues like mergers or acquisitions, the election of the board of directors, or stock splits or dividends.

Common stock is classified to differentiate it from preferred stock, with each being considered a stock class. Different series of each can be issued from time to time, such as Series B Preferred Stock.

Companies may issue two classes of common stock, with one class typically having voting shares and the other having non-voting shares. The main reason for this is to preserve control over the company.

Some companies, like Alphabet, the parent company of Google, issue different classes of common stock, such as GOOG and GOOGL.

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Classification is a way to differentiate between types of stock, specifically common stock and preferred stock. Common stock is classified separately from preferred stock.

There are different series of common stock, such as Series B Preferred Stock, which is a type of preferred stock. Companies may also issue a super-voting series of common stock, known as Class B Common Stock.

Common stock can be classified into different types, including voting shares and non-voting shares. In most cases, a company will issue one class of voting shares and another class of non-voting shares.

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Different classes of common stock usually enjoy the same rights to the company's profits, despite the difference in voting rights. This means that even if one class of stock has more voting power, they still receive the same share of profits.

Here are some common classifications of common stock:

Common stock and preferred stock are two main types of stock that let investors own a stake in a business.

Common stock gives holders voting rights in the company, allowing them to participate in decisions about corporate policies and the election of the board of directors.

Preferred stock, on the other hand, generally does not give holders voting rights, although this can vary depending on the specific share terms.

Common stock is not guaranteed dividends and are paid out at the board of directors' discretion, whereas preferred stock usually has fixed dividends that must be paid before any dividends are given to common stockholders.

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In the event of liquidation, common stockholders are last in line to claim any remaining assets, while preferred stockholders have a higher claim on assets and are paid out before common stockholders.

Here's a comparison of common and preferred stock:

Preferred stock may be converted to common shares based on terms, but common stock cannot be converted into other forms of security.

There are other types of stock beyond common and preferred stock. Alphabet, the parent company of Google, has two classes of common stock: GOOG and GOOGL.

Some companies issue different classes of stock. This can create different levels of ownership and voting power. For example, Alphabet's Class A and Class C shares have different voting rights.

Companies may issue different classes of stock for various reasons, such as to attract different types of investors or to provide more flexibility in their capital structure. The specific reasons and details can vary widely.

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There are several types of common stock, including Class A and Class C shares. Alphabet's Class A shares have one vote per share, while Class C shares have no votes per share. This difference in voting power can affect how decisions are made in the company.

Some companies issue trust preferred securities, which are hybrid securities that combine features of debt and equity. These securities can provide a way for companies to raise capital without issuing new shares.

Companies may also issue dual-class stock, which allows for different classes of stock with different voting rights. This can create different levels of ownership and voting power, as seen in Alphabet's Class A and Class C shares.

Here is a list of types of stock mentioned in this section: