What Is Common Stock?

Security that reflects ownership in a business is known as common stock. Common stockholders elect the board of directors and have a say in business decisions. Long-term, this type of stock ownership generally provides greater rates of return. Common shareholders, on the other hand, only have rights to a company’s assets once bondholders, preferred shareholders, and other debtholders have been paid in full. The stockholder’s equity part of a company’s balance sheet is where common stock is recorded.
The Dutch East India Company issued the first common stock in 1602 and listed it on the Amsterdam Stock Exchange. Larger equities in the United States are traded on a public exchange like the New York Stock Exchange (NYSE) or the Nasdaq. In 2019, the former had 2800 stocks listed on its exchanges, while the latter had 3300. In June 2018, the NYSE had a market value of $28.5 trillion, making it the world’s largest stock exchange by market capitalization.

Common stock provides shareholders with voting rights about decisions involving the company. Most profits from common stock come from capital gains, but some do pay dividends. However, they are last in line to receive any assets in the event of liquidation.

It’s ownership of the company and becomes more (or less) valuable based largely on the company’s expected future profits.