Common stock

Common stock is the nominal or par value of all shares issued by the company to its equity holders. It sits at the top of the shareholders equity section of the balance sheet, representing the most junior claim on the company's assets and earnings, after every creditor, bondholder, and preferred shareholder has been satisfied.

The figure recorded on the balance sheet is almost always trivially small relative to the actual capital raised from shareholders. It reflects only the par value of each share, a largely historical legal construct set at an arbitrarily low amount such as one cent or one dollar per share, with the remainder of share issuance proceeds recorded separately in additional paid-in capital. Some companies report the two together as one line, common stock and paid-in capital, and data sites then show that combined figure as common stock. In that case it includes everything shareholders paid for their shares and can be very large. Common stockholders are the residual claimants of the business, meaning they bear the first loss if the company deteriorates and capture the full upside if it prospers, which is why equity is described as the riskiest layer of the capital structure and commands the highest required return.

The rights attached to common stock typically include voting on major corporate decisions such as board elections, mergers, and capital structure changes, the right to receive dividends if and when declared by the board, and the right to participate in any residual assets in a liquidation after all senior claims are settled.

Some companies issue multiple classes of common stock with different voting rights, a structure common in technology companies where founders retain supervoting shares to maintain control even as their economic ownership is diluted through equity issuances. This separation between economic interest and governance power is something institutional investors and proxy advisors have increasingly scrutinised as a corporate governance concern.