A common stock is a security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders; preferred shareholders and other debt holders have been paid in full.
Preferred shares are a class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights.
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The precise details as to the structure of preferred stock is specific to each corporation. However, the best way to think of preferred stock is as a financial instrument that has characteristics of both debt (fixed dividends) and equity (potential appreciation). Also known as "preferred shares".
Penny stocks, also known as cent stocks in some countries, are common shares of small public companies that trade at low prices per share. In the United States, the SEC defines a penny stock, as a security that trades below $5 per share, is not listed on a national exchange, and fails to meet other specific criteria. In the United Kingdom, stocks priced under £1 are called penny shares. In the case of many penny stocks, low market price inevitably leads to low market capitalization. Penny stocks in the USA are often traded over-the-counter on the OTC Bulletin Board, or Pink Sheets. In the United States, the Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA) have specific rules to define and regulate the sale of penny stocks.
