Common Stock Equivalent

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DEFINITION of 'Common Stock Equivalent'

Securities such as stock options, warrants, preferred bonds, two-class common stock and contingent shares that can be converted into common stock. Sometimes preferred stock can also be converted to common stock.



BREAKING DOWN 'Common Stock Equivalent'

Also called common shares or ordinary shares, common stock is what most people buy when they invest in a stock. It typically gives them the right to vote on corporate issues in proportion to their ownership in the company and the right to receive dividend payments. Common stock may be subdivided into class A shares and class B shares, which can have different voting and dividend rights. The other type of stock is called preferred stock, and its holders receive priority over common stock holders when dividends are paid and in the event the company liquidates.

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RELATED FAQS
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    We have a client who has common stock in XYZ and she claims those stocks "came" from the preferred stock they use to own? ... Read Answer >>
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    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable ... Read Answer >>
  3. Can preferred stocks be traded like common stocks? Are their prices the same?

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