Further to the description of equity and debt securities in Chapter 2, many variations of securities exist with varying characteristics that are designed to meet the needs of both issuers and investors. This chapter aims to convey the essential characteristics of each type.
Companies issue equity, some companies issuing solely common stock or ordinary shares, others issuing a variety of the following types.
Issuers of common stock or ordinary shares are able to raise long-term capital. The units of ownership in a publicly owned company are typically named common stock (the term used in the USA) or ordinary shares (UK); these securities carry no undertaking by the issuer to repay an investor's cash. The vast majority of daily trading volume in equities is effected over such securities, as opposed to other types of equity.
Such shareholders (also known as stockholders in the USA) have the right to vote on issues such as the appointment of directors and the payment of dividends. However these rights do not apply to shareholders in non-voting shares (where issued by a company). Some companies issue A and B shares that typically represent voting and non-voting shares.
If a company becomes insolvent, ordinary shareholders/common stockholders rank lower in the hierarchy of those due any assets than, for example, preference shareholders.
In North America, the everyday term in use for this ...