Demystifying Private Investing: Publication #1: Valuation Terms

Preferred and Common stock are ownership shares — or ‘equity securities’ — issued by companies. These securities entitle stakeholders to a specific ownership percentage of the company. The primary differences between Preferred and Common stock are voting rights and priority. Holders of Preferred stock have priority when dividends are issued, and will be paid first when the company is sold or liquidated. For example, if a company goes bankrupt, the redistribution of the residual assets owned by shareholders will first be distributed to Preferred shareholders, and the remainder (if any) will go to the Common shareholders.

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