What are the classifications of stocks?

Common stock is a share that has ordinary rights in the management of a company and in the distribution of its earnings and property, and represents the right to claim the earnings and residual property of a company after all claims have been satisfied, as well as the claims of preferred shareholders for earnings and claims of compensation. Ordinary shares form the basis of a company's capital and are a basic form of stock. Stocks traded on the Shanghai and Shenzhen stock exchanges are all common stocks.

Common shareholders enjoy the following basic rights in proportion to their shareholdings:

(1) The right to participate in corporate decision-making. Common shareholders have the right to participate in general meetings of shareholders and have the right to propose, vote and elect, and may also appoint others to exercise their shareholders' rights on their behalf.

(2) The right to profit distribution. Common shareholders are entitled to receive dividends from the distribution of the company's profits. Dividends on common stock are variable and are determined by the company's profitability and its distribution policy. Common stockholders must receive a fixed dividend before preferred stockholders are entitled to dividend distribution rights.

(3) Preferred Warrants. If the company needs to expand and issue more common stock, the existing common stockholders have the right to buy a certain number of newly issued shares at a certain price below the market price according to the proportion of their shareholdings, so as to maintain the original proportion of their ownership of the enterprise.

(4) The right to distribution of surplus assets. In the event of bankruptcy or liquidation of a company, if the company's assets are still remaining after repayment of outstanding debts, the remaining portion will be distributed in the order of preferred shareholders first and common shareholders second.

Preferred stock

Preferred stock is relative to common stock. Preferred stock has priority over common stock in terms of the right to profit sharing and distribution of surplus property.

(1) Preferential distribution rights. When the company distributes profits, the shareholders who own preferred stock are more likely than the shareholders who hold common stock, to be distributed first, but enjoy a fixed amount of dividends, that is, the dividends of preferred stock are relatively fixed.

(2) Preferential claims. If the company is liquidated and the remaining property is distributed, the preferred stock is distributed before the common stock. Note: When the company decides not to distribute dividends for several consecutive years, preferred shareholders can enter the shareholders' meeting to express their opinions and protect their own rights.