1.2. Common Stock

Most corporations issue common stock. When a corporation is formed, common stock is usually the only class of stock issued; other classes of ownership rights, such as preferred stock, may come later. Common stock offers investors a pro rata share of the corporation’s profits. Common stock represents the primary ownership of a corporation, and it offers investors the greatest potential reward. However, bondholders and preferred shareholders are paid before common shareholders, and in the event of bankruptcy, common stockhol