Common Stock Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Common Stock, written in plain English, along with examples of how it is used.

What is Common Stock?

Common stock is the category of shares in a corporation.Common stock holders get dividend only if the company makes profits and since they participate in the profit and loss of the company they enjoy voting rights unlike preferred stock holders to whom a fixed percentage of dividend has to be paid and they dont enjoy voting rights.

History and Meaning of Common Stock

Common stock is the type of stock that represents the ownership in a company. Its shareholders have the right to vote on company policies and elect the board of directors. These shareholders also have the opportunity to receive dividends if the company has profits to distribute among shareholders. Common stock is considered a higher risk investment when compared to bonds or preferred stock, however, it often offers a higher potential for return since it can appreciate in value over time.

Examples of Common Stock

  1. Google's parent company, Alphabet Inc., has a total of 680 million shares of common stock outstanding as of March 31, 2021, according to its latest quarterly report.
  2. Tesla Motors, Inc. issued 1.3 million shares of common stock in a public offering in 2020, at a price of $767 per share.
  3. Apple Inc. has more than 16 billion shares outstanding, making it one of the largest common stock issuances in history.
  4. Ford Motor Co. is issuing new common stock to raise money as it looks to invest in new technologies to stay competitive in the market.
  5. McDonald's Corporation common stock is listed on the New York Stock Exchange and traded under the ticker symbol MCD.

Legal Terms Similar to Common Stock

  1. Preferred stock: This type of stock also represents ownership in a company but offers a fixed dividend payment and has no voting rights.
  2. Stockholder: A stockholder is a person or entity that owns shares of a company's stock.
  3. Share certificate: A share certificate is a certificate issued by a corporation to denote ownership of a specific number of shares of that company's stock.
  4. Proxy: A proxy is a person authorized to act on behalf of another person, including shareholders who cannot attend a company's meeting and vote on company decisions themselves.
  5. Dividend: A dividend is a payment made by a corporation to its shareholders, typically in the form of cash, as a distribution of the company’s profits.