LEGAL RIGHTS OF AND PRIVILEGES OF COMMON STOCKHOLDERS

Represents ownership. Ownership implies control. Stockholders elect directors. Directors hire management. Management s goal: Maximize stock price.

Preemptive Right

oRight to purchase new shares in proportion to current holdings. TYPES OF COMMON STOCK
Classified Stock Founders shares, with voting rights but dividend restrictions. New shares might be called Class A shares, with voting restrictions but full dividend rights.

common stock classified as "A" or "B" where "A" has certain advantages (for example, voting power) that "B" doesn't THE MARKET FOR COMMON STOCKS

Closely held corporation

A corporation that is owned by a individuals who are typically associated with the firms management Stock is publicly traded but most is held by a few shareholders who have no plans to sell

Publicly owned corporation

A corporation that is owned by a relatively large number of individuals who are not actively involved in its management

TYPES OF STOCK MARKET TRANSACTIONS

Secondary Market
A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves. The market in which used stocks are traded after they have been issued by corporation

Primary Market
A market that issues new securities on an exchange. Companies, governments and other groups obtain financing through debt or equity based securities. Primary markets are facilitated by underwriting groups, which consist of investment banks that will set a beginning price range for a given security and then oversee its sale directly to investors.

Initial Public Offering - IPO

The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.