Common Stock Equivalent

AAA

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.



INVESTOPEDIA EXPLAINS '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.

VIDEO

Loading the player...
RELATED TERMS
  1. Deferred Equity

    A type of security, such as preferred shares or convertible bonds, ...
  2. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  3. Ordinary Shares

    Any shares that are not preferred shares and do not have any ...
  4. Share Class

    A designation applied to a specified type of security such as ...
  5. Common Shareholder

    An individual, business or institution that holds common shares ...
  6. Common Stock

    A security that represents ownership in a corporation. Holders ...
RELATED FAQS
  1. Is a company's paid in capital affected by the trading of its shares in the secondary ...

    The amount of paid-in capital a company has is not affected by the trading of its shares on the secondary market. Paid-in ... Read Full Answer >>
  2. Why is the value of capital stock important to public shareholders?

    The value of a company's capital stock is important to public shareholders, because a company's capital stock represents ... Read Full Answer >>
  3. How do changes in capital stock illustrate the overall health of a company?

    Changes in capital stock normally illustrate that the overall health of a company is strong, and that it is seeking to raise ... Read Full Answer >>
  4. What is the difference between Class A shares and other common shares of company's ...

    The difference between Class A shares and other common shares of a company’s stock is usually the amount of voting rights ... Read Full Answer >>
  5. Why should investors consider the fully diluted share amount?

    Investors should consider a company's fully diluted share amount before purchasing the company's stock, because it could ... Read Full Answer >>
  6. What's the difference between basic shares and fully diluted shares?

    Basic shares and fully diluted shares are different types of methods to measure the amount of shares investors hold in a ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  2. Bonds & Fixed Income

    Introduction To Convertible Preferred Shares

    These securities offer an answer for investors who want the profit potential of stocks but not the risk.
  3. Investing Basics

    Knowing Your Rights As A Shareholder

    We delve into common stock owners' privileges and how to be vigilant in monitoring a company.
  4. Investing Basics

    Understanding Related-Party Transactions

    In business, a related-party transaction refers to a transaction where parties on both sides have a common interest or relationship.
  5. Investing Basics

    Explaining Tender Offers

    A tender offer is a broad public offer made by a person or company to purchase all or a portion of the shares of a publicly traded company.
  6. Fundamental Analysis

    Can Japan's Stewardship Code Turn Passive Funds Into Active Managers?

    Institutional investors in Japan have been criticized for being too cozy with corporates. Can a code force them to focus on the needs of beneficiaries?
  7. Investing Basics

    Explaining Non-Controlling Interest

    Technically, a non-controlling interest is any percentage of ownership that is less than 50% of a company’s voting equity.
  8. Investing Basics

    Explaining Net Tangible Assets

    Net tangible assets is a company’s total assets subtracting both intangible assets (such as goodwill and intellectual property) and total liabilities.
  9. Entrepreneurship

    Comparing Impact Investing & Venture Philanthropy

    Impact investing and venture philanthropy might be similar, but there are differences and one is more popular than the other right now.
  10. Investing Basics

    Explaining Privatization

    For a publicly traded company, privatization is the act of transitioning the company to ownership by private individuals.

You May Also Like

Hot Definitions
  1. Radner Equilibrium

    A theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then ...
  2. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  3. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  4. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  5. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  6. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!