Stocks come in different forms, and two of the most general kinds of stocks are common and preferred stocks. Common ProfitiX Broker stocks generally are the most typical stocks found in the market, while preferred stocks are different in that preferred stockholders are prioritized when the company goes bankrupt. In this article, we’ll tackle the different benefits and rights that you may get as a shareholder when you hold common stocks.
Voting Power on Key Issues
Voting power includes appointing directors and proposals for fundamental changes affecting the company like mergers or liquidations.
Voting takes place at the company’s annual meetings. In case the shareholder cannot physically attend the meetings, they can cast their vote by proxy or through the mail.
Ownership of a Portion of the Company
As you may know, preferred shareholders and bondholders are prioritized and paid first should the company go belly up.
On the other hand, when the ProfitiX Trading Platform business is doing well, common shareholders own a slice of something that sports value. Common shareholders have claims on a portion of the assets that the company owns.
As the assets whip out profits and as the profits are reinvested in more assets, shareholders see a return as the value of their shares increases as stock prices rise.
Transferring Ownership
The shareholders have the right to transfer ownership, meaning they can trade their stock on an exchange.
The right to transfer ownership might appear at first as mundane or insignificant. However, the liquidity offered by the stock exchanges is very important.
Liquidity refers to the degree to which the stock, or other assets or security for that matter, can be bought or sold in a short period of time without affecting the asset’s price. And liquidity is one of the key factors that differentiate stocks from an investment like real estate.
If you as an investor own a property, you may have to wait for months to convert your investment into cash. Since the stocks are so liquid, you may move your money into other places more quickly.
Dividends
Apart from the claims on assets, investors also have entitlements on any profits that the company pay out in the form of dividends.
The management of a company essentially has two options with profits: they can be reinvested back into the company, meaning the company will increase its overall value, or paid out in the form of dividend.
The board of director decides how much or what percentage of profits should be paid out. On the other hand, whenever dividends are announced, common shareholders are entitled to receive their shares.
Checking Corporate Books and Records
Public companies are subject to regulations that require them to release their financials in the form of annual reports: one for the shareholders and one for the Securities and Exchange Commission (SEC).
Suing Wrongful Acts
Typically, suing that company happens in the form of a shareholder class-action lawsuit. For instance, a company can be faced with a series of class-action lawsuits if it was discovered that it overstated is earnings report, providing the shareholders and investors an erroneous view of its financial health.
