common stock

Definition

Securities representing equity ownership in a corporation, providing voting rights, and entitling the holder to a share of the company's success through dividends and/or capital appreciation. In the event of liquidation, common stockholders have rights to a company's assets only after bondholders, other debt holders, and preferred stockholders have been satisfied. Typically, common stockholders receive one vote per share to elect the company's board of directors (although the number of votes is not always directly proportional to the number of shares owned).
The board of directors is the group of individuals that represents the owners of the corporation and oversees major decisions for the company. Common shareholders also receive voting rights regarding other company matters such as stock splits and company objectives. In addition to voting rights, common shareholders sometimes enjoy what are called "preemptive rights". Preemptive rights allow common shareholders to maintain their proportional ownership in the company in the event that the company issues another offering of stock. This means that common shareholders with preemptive rights have the right but not the obligation to purchase as many new shares of the stock as it would take to maintain their proportional ownership in the company. also called junior equity.

For more information see Common Stock vs. Preferred Stock, and Stock Classes at InvestorGuide.com.

Use common stock in a sentence

We bought some common stock and it made everyone pretty happy because we had never bought any stock before and this was our first.

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The new CEO was selected by the common stock share holders in conjunction with the corporate executive team, but I had no say in the matter.

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In the case of a company's liquidation, holders of common stock have rights to the assets but only after preferred shareholders and bondholders have received their money.

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