Common Stocks

Securities representing equity ownership in a corporation, providing voting rights, and entitling the holder to a share of the company’s success throughdividends and/or capital appreciation. In the event of liquidation, common shareholders have rights to a company’s assets only afterbondholders, other debt holders, and preferred shareholdershave been satisfied. Typically, common shareholders receiveone vote per share to elect the company’s board of directors(although the number of votes is not always directlyproportional to the number of shares owned). The board ofdirectors is the group of individuals that represents theowners of the corporation and oversees major decisions for the company. Common shareholders also receive voting rights regarding other company matters such as stock splitsand 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 anotheroffering of stock. This means that common shareholders with preemptive rights have the right but not the obligationto purchase as many new shares of the stock as it wouldtake to maintain their proportional ownership in the company. also called junior equity or common stock.