common shares

Definition

Securities representing equity ownership in a corporation, providing voting rights, and entitling the holder to a share of the company's success throughdividends and/or capital appreciation. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, other debt holders, and preferred shareholders have been satisfied. Typically, common shareholders receive one vote per share to elect the company's board of directors (although the number of votes is not always directly proportional to the number of shares owned).
The board of directors is the group of individuals that represents the owners of the corporation and oversees major decisions for the company. Common shareholders also receive voting rights regarding other company matters such as stock splits and company objectives. In addition to voting rights, common shareholders sometimes enjoy what are called "preemptive rights". Preemptive rights allow common shareholders>to maintain their proportional ownership in the company in the event that the company issues another offering of stock. This means that common shareholders with preemptive rights have the right but not the obligation to purchase as many new shares of the stock as it would take to maintain their proportional ownership in the company. also called junior equity or common stock.

For more information see Common Stock vs. Preferred Stock, and Stock Classes at InvestorGuide.com.

Use common shares in a sentence

You should try to find the right common shares to get involved with and then buy as many as you deem reliable.

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There were ten thousand common shares outstanding, and they were looking to even increase that number through a new offering.

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John Smith was able to more than 50 percent of ABC Incorporated's common shares effectively becoming the owner of the company.

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