Common stock is a type of security that represents an ownership interest—or equity—in a company. Holders of common stock have rights that typically include the right to vote to elect members to a company’s board of directors and to vote on certain corporate actions (such as takeover bids), and may have rights to dividend payments based on the company’s profits.
While common stockholders may have authority to exercise some control over the company through voting, they are typically last in the liquidation preference. For example, if the company is sold, common stockholders usually have rights to the company’s assets only after debtholders and preferred stockholders have been paid in full.
Our article, What is a Security, examines the different types of ownership interests that are used in the securities markets.
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