Stock Issuance by a Corporation

Stock represents an ownership interest in a corporation, which is represented by the issuance of a certificate for shares of stock in exchange for capital from the investors. Money or property given

The two most common types of securities — common stock and preferred stock — are discussed below.

Common Stock

Common stock are the shares in a corporation with no preferences or priorities over other classes of stock. The rights in these shares include: voting rights, distribution rights, liquidation rights, and other rights. All rights are the same for each shareholder holding common stock on a share-by-share basis.

Preferred Stock

Preferred stock are the shares in a corporation that are entitled to a preference above shares of common stock. The shareholders of preferred stock have the following rights:

• Special voting or veto rights;
• A priority on distribution of dividends;
• A priority on the corporation's assets upon liquidation or merger;
• A right to convert to common stock based on a formula;
• A right to force the corporation to buy back shares at some time in the future (called "redemption rights");
• Protection against certain stock splits, stock dividends, and future cheap issuances of stock (called "antidilution" rights);
• A possible separate right to elect a designated number of directors.