Common Stock

Common Stock refers to the actual Share Security and the Certificate issued at a specific Par Value. Today, Share Certificates in most markets are held electronically.

The difference between Common Equity and Common Stock, is that Common Stock refers to the actual security listed on the Stock Market. Common Equity is the Balance Sheet classification, part of Shareholders’ Funds. Common Stock is represented by a certificate of ownership, which nowadays is held in an electronic format. The Common Stock is issued at a Par Value which has no relationship to the Stock Price traded. The only connection is the price quoted or traded, which is per an individual Common Stock certificate. The Par Value could be used to calculate the number of shares on issue.

For example, if the Balance Sheet entry is Common Stock at $100 million, issued at a Par Value of $100, then divide the $100,000,000 / 100, which gives 1 million shares on issue. The holders of Common Stock are the Shareholders and have all the right of Shareholders as they own the Company. The rights of Shareholders include, voting rights on key decisions presented to Shareholders. This includes electing Executive Management and other votes as the Board see fit, such as the acceptance of a Takeover Offer.