What Is a Common Stock?

Ordinary shares are shares that enjoy ordinary rights and assume common obligations, and are the most basic form of company shares. Shareholders of ordinary shares have equal rights to the management and earnings of the company, and are subject to greater dividends in accordance with the company's operating efficiency, which is relatively risky. ^[1] Shares that enjoy ordinary rights in the company's operating management and profits and the distribution of property represent the rights to claim profits and residual property of the company after meeting all the claims for repayment of claims and the rights to rights and claims of preferred shareholders. It forms the basis of the company's capital and is a basic form of stock. It is also the largest and most important stock. The stocks currently traded on the Shanghai and Shenzhen stock exchanges are common stocks.

Common stock

Ordinary shares are shares that enjoy ordinary rights and assume common obligations, and are the most basic form of company shares. Shareholders of ordinary shares have equal rights to the management and earnings of the company, and are subject to greater dividends in accordance with the company's operating efficiency, which is relatively risky. ^[1]

Ordinary shares are a kind of shares that change with changes in corporate profits. They are the most common and basic shares in the capital composition of joint-stock companies, and they are the basic part of the capital of joint-stock companies.

The basic feature of common stock is its

The rights of holders of common shares are as follows:

(1) Shareholders holding ordinary shares are entitled to

A company limited by shares may issue different types of ordinary shares in accordance with the relevant regulations and the needs of fundraising and investors.

1. According to the stock's bearer or not, it can be divided into

Holders of common stocks enjoy the following basic rights in proportion to the shares they hold:

(1) Participating in company operations

The price of common stock, to a large extent, does not depend on its past or present profitability, but on the public's perception of such profitability in the future. In general, the price of a common stock is the comprehensive result of various estimates made by the investing public on its profitability in the next 6 months, a year or even more. Some of these estimates may be completely wrong. Other estimates may be very accurate and close to reality, but the buying and selling behavior of many people who make different estimates and predictions basically determines the current price of a stock.

The ability to buy securitiesespecially ordinary sharessuccessfully depends on the ability to accurately predict in advance. Therefore, Jingbang reminded that just looking at historical data carefully may not be enough to explain the problem, and may even be harmful and useless. Naturally, choosing common stock is a difficult technique to grasp, because it provides great returns to successful people. It requires a proper judgment between past facts and future possibilities. It requires investors. Has the ability to calm and calm the mind.

(A) the advantages of common stock financing

Compared with other financing methods, common stock financing has the following advantages:

1. Issuing common stock to raise capital is permanent, has no expiry date and does not need to be returned. This is extremely beneficial to ensuring the company's minimum need for capital and maintaining the company's long-term stable development. Therefore, common stock can be used as a form of company's long-term equity incentive.

2. There is no fixed dividend burden on the financing of the issuance of common shares. The payment of dividends and how much depends on whether the company is profitable and operating needs. The financial burden caused by operating fluctuations on the company is relatively small. Since there is no fixed pressure to repay principal and interest on the financing of common shares, the financing risk is relatively small.

3. The capital raised from the issuance of ordinary shares is the company's most basic source of funds. It reflects the strength of the company and can be used as a basis for other ways of raising funds. In particular, it can provide protection for creditors and enhance the company's ability to borrow.

4 Because the expected return of common stock is high and can offset the effect of inflation to a certain extent (usually during the period of inflation, the common stock also appreciates with the appreciation of real estate), so it is easy to absorb funds for common stock financing.

(2) Disadvantages of common stock financing

However, there are some disadvantages to using common stock to raise capital:

1. The cost of capital for common stock is high. First of all, from the perspective of investors, investing in common stock is relatively risky, and accordingly requires a higher return on investment. Secondly, for financing companies, common stock dividends are paid out of after-tax profits, and unlike bond interest, which is paid out of pre-taxes as expenses, it is not tax deductible. In addition, the cost of issuing common stock is generally higher than other securities.

2. Financing with common stock will increase new shareholders, which may divert control of the company. In addition, the new shareholders' share of the company's accumulated surplus before the issue of new shares will reduce the net earnings per share of ordinary shares, which may cause the stock price to fall.

Difference between ordinary shares and special shares

Special stocks mainly refer to preferred stocks.

The stocks traded in Shanghai and Shenzhen in 2012 were common stocks.

Holders of common stocks enjoy the following four basic rights in proportion to the shares they hold:

1. Right to participate in decision-making of the company.

2. Profit distribution rights.

3 Preferred stock option.

4 Distribution of remaining assets.

Preferred shares: Stocks that the company gives investors certain priority when raising funds.

The priority of preferred shares is mainly manifested in two aspects. First, preferred shares enjoy a fixed dividend, do not fluctuate with the performance of the company, and can receive dividends before ordinary shareholders. In the second aspect, when the company goes bankrupt for liquidation of assets, the shareholders of preferred shares have the right to claim the remaining assets of the company before the shareholders of ordinary shares.

Therefore, compared with common stock, preferred stock has the following four characteristics:

1. Dividend rate is fixed.

2. Dividend distribution is preferred.

3 Distribution of remaining assets is given priority.

4 There is generally no voting right.

As of 2013, China has not issued preferred shares