Common Stock

Common stock represents ownership in a company. Think of it as a slice of the whole pie. When you own common stock, you’re a shareholder—a part-owner of the business. While owning common stock can offer potential rewards, it also comes with certain risks.

What are the benefits of owning common stock?

• Potential for growth: If the company performs well, the value of your common stock may increase, allowing you to sell it for a profit. This potential for appreciation is a key driver for many stock investors.
• Dividends (sometimes): Some companies distribute a portion of their profits to shareholders as dividends. While not guaranteed, dividends can provide a stream of income. However, many early-stage companies reinvest profits for growth and don’t pay dividends.
• Voting rights: Common stockholders typically have voting rights on certain company matters, such as electing board members or approving major corporate actions. This gives you a say in the company’s direction.

What are the risks of owning common stock?

• Potential for loss: If the company underperforms, the value of your common stock may decrease. You could lose some or all of your initial investment.
• No guarantees: There’s no guarantee of profitability or dividends. Startup investments are particularly risky, and many fail.
• Volatility: Stock prices can fluctuate significantly, sometimes due to factors outside the company’s control (like broader market trends). This volatility can be unsettling for some investors.
• Liquidation preference: In a downside scenario (like a company sale or bankruptcy), other investors (like those holding preferred stock) may have a priority claim on the company’s assets. Common stockholders are last in line. Learn more: [[Liquidation Preference What Investors Get First]]

Common Stock vs. Preferred Stock

It’s important to distinguish between common stock and preferred stock. Preferred stock typically offers certain advantages, such as a fixed dividend rate and priority in a liquidation event. However, preferred stockholders often have limited or no voting rights. Learn more: [[Common Stock vs Preferred Stock Key Differences]]

Common Stock and Earlyasset

Earlyasset helps common stockholders in private companies understand the value of their shares and access liquidity. Our platform offers tools like the Instant Offer and Portfolio Tracker to empower shareholders with information and control. Learn more: [[Instant Offer Getting Indicative Pricing]], [[Portfolio Tracker Monitoring Your Private Equity]]

So here’s what we covered:

• The definition of common stock and what it means to be a shareholder.
• The potential benefits and risks of owning common stock.
• The difference between common and preferred stock.
• How Earlyasset can help common stockholders.