Loading the player...

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.

RELATED TERMS
  1. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  2. Convertible Preferred Stock

    Preferred stock that includes an option for the holder to convert ...
  3. Preference Shares

    Company stock with dividends that are paid to shareholders before ...
  4. Convertible Security

    An investment that can be changed into another form. The most ...
  5. Common Stock

    A security that represents ownership in a corporation. Holders ...
  6. Dividend Enhanced Convertible Stock ...

    Preferred stock that provides the holder with premium dividends ...
Related Articles
  1. Managing Wealth

    What is Convertible Preferred Stock?

    Convertible preferred stock is preferred stock that can be converted into common stock as of a predetermined date at a specified ratio.
  2. Managing Wealth

    What You Need To Know About Preferred Stock

    Curious about preferred shares? Here's what you should know about these bond-like instruments.
  3. Investing

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  4. Financial Advisor

    Advising FAs: How To Explaining Stocks to a Client

    Without a doubt, common stocks are one of the greatest tools ever invented for building wealth.
  5. Managing Wealth

    The Advantages of Preferred Dividends

    Preferred dividends are cash distributions a company pays on its preferred shares.
  6. Managing Wealth

    The Different Between Preferred and Common Stock

    Preferred and common stocks are different in two key ways.
  7. Investing

    Introduction To Convertible Preferred Shares

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

    Preferred Stocks versus Bonds: How to Choose

    What is the difference between corporate bonds and preferred stock? The following are a list of pros and cons for each investment.
  9. Investing

    What are Preference Shares?

    Preference shares, also referred to as preferred shares, are equity shares that give the shareholders certain rights ahead of common shareholders. For instance, when the corporation declares ...
  10. Investing

    Convertible Bonds: Pros And Cons For Companies And Investors

    Find out why businesses choose this type of financing and what effect this has on investors.
RELATED FAQS
  1. What is common stock and preferred stock?

    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable ... Read Answer >>
  2. What is the difference between the equity market and the stock market?

    Discover the basic information about the equity, or stock, market and the two primary classifications of equities that are ... Read Answer >>
  3. Can anyone own common stock in a company?

    Understand who can purchase common stock as well as the key characteristics that differentiate common stock from preferred ... Read Answer >>
  4. Can preferred stocks be traded like common stocks? Are their prices the same?

    First, let's look at the differences and similarities between common stocks and preferred stocks. Both represent a piece ... Read Answer >>
  5. What is the difference between Class A shares and other common shares of company's ...

    Discover how a company can break down its common stock into multiple classes and how these classes differ from one another ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center