If before, our team provided information on blue chip stocks, this time the author will explain whether it is common stock.
Ordinary shares are securities that represent ownership in a company.
Shareholders will normally appoint a board of directors and vote for the company’s corporate policies.
This form of equity ownership often provides a higher long -term rate of return.
However, in the event of liquidity, ordinary shareholders have rights to the company’s assets only after the bondholders, preferred shareholders and other creditors are paid in full.
This makes common stock more risky than debt or preferred stock.
The advantage of common stock is that it will usually outperform bonds and preferred stock in the long run.
Ordinary shares are reported in the shareholders ’equity portion of the company’s balance sheet.
Many companies issue all three types of securities. For example, Wells Fargo & Company has several bonds available in the secondary market.
The company also has preferred stock such as Series L (NYSE: WFC-L) and common stock (NYSE: WFC)
The first common stock was established in 1602 by the Dutch East India Company and introduced on the Amsterdam Stock Exchange.
Larger United States (US) stocks are traded on public exchanges such as the NYSE or Nasdaq.
As of 2019, the Amsterdam Stock Exchange has 2,800 shares listed on its exchange while the NYSE has 3,300 shares listed.
The NYSE has a market capitalization of US $ 28.5 trillion as of June 2018, making it the world's largest stock exchange by market cap.
There are several international stock exchanges for foreign stocks such as the London Stock Exchange and the Tokyo Stock Exchange.
Companies that are small and unable to meet the listing requirements of an exchange are considered unlisted.
These unlisted shares are traded on the Over-The-Counter Bulletin Board (OTCBB).
For a company to issue shares, the firm needs to start by holding an initial public offering (IPO).
An IPO is the best method for a company to find additional capital to grow.
To begin the IPO process, the company needs to work with an investment banking firm that will determine the type and price of the shares.
After the IPO phase is completed, the public is allowed to buy new shares in the secondary market.
