Common stock is a security that represents ownership in a corporation organized under the laws of a US state such as Delaware. Holders of common stock exercise control by electing a board of directors and voting on corporate actions, as outlined in the corporation’s charter. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common stockholders have rights to a company’s assets only after secured lenders, debtholders, other creditors, and preferred stockholders have been paid in full. This makes common stock riskier than debt or preferred stock.
Cash investors typically receive preferred stock in exchange for their investment in the company, meaning they can negotiate distinct voting rights and liquidation preferences.