1. Ordinary shares
Ordinary shares are a kind of shares that change with the change of profits of the enterprise, and they are the most common and basic shares in the capital composition of the joint-stock company, and they are the basic part of the capital of the joint-stock enterprise. The basic characteristic of ordinary shares is that their investment returns (dividends and distributions) are not agreed upon at the time of purchase, but are determined after the fact based on the business performance of the company issuing the shares. If the company's business performance is good, the return on common stock is high; conversely, if the business performance is poor, the return on common stock is low. Common stock is the most important and basic share in the capital structure of a joint stock company, and it is also the most risky kind of share, but it is also the most basic and common kind of stock. The stocks listed on China's SSE and SZSE are all common stocks.
The characteristics of common stock can be summarized as follows: (1) shareholders holding common stock are entitled to receive dividends, but only after the company pays dividends on debt and preferred stock. Dividends on common stock are not fixed and generally depend on the amount of the company's net profit. When the company is well run and profits are increasing, the common stock can receive more dividends than the preferred stock, and the dividend rate can even be more than 50%; however, in the years when the company is not well run, the company may not even get a penny, and may even lose its capital. (2) When a company is liquidated due to bankruptcy or winding up, ordinary shareholders are entitled to a share of the remaining assets of the company, but ordinary shareholders must come after the creditors of the company and the preferred shareholders in order to get a share of the property, and if the property is more than enough, if it is less, if it is not, then they can only give up. From this it can be seen that the ordinary shareholders are more closely related to the fate of the company, honor and disgrace and * * *. When the company obtains huge profits, ordinary shareholders are the main beneficiaries; and when the company loses money, they are the main losers. (3) Ordinary shareholders generally have the right to speak and vote, i.e., the right to speak and vote on major corporate issues. Ordinary shareholders have the right to vote on one share if they hold one share, and on two shares if they hold two shares. Any ordinary shareholder is entitled to attend the annual general meeting, the company's highest meeting, but if he or she does not wish to attend, he or she may appoint a proxy to exercise his or her voting rights. (4) Ordinary shareholders generally have preferred stock options, which means that when a corporation issues additional new common stock, existing shareholders have the right to preferentially (and possibly at a lower price) purchase the newly issued stock in order to maintain their interest in the corporation by keeping their original percentage of ownership in the business unchanged. For example, if a company originally had 10,000 shares of common stock and you owned 100 shares, or 1%, and now the company decides to issue 10% more common stock, or 1,000 additional shares, then you would be entitled to purchase 1%, or 10 shares, of those shares at a price below the market price in order to keep your percentage ownership of the stock unchanged. When new shares are issued, shareholders with preferential subscription rights can either exercise their preferential subscription rights to subscribe for the newly issued shares or sell and transfer their subscription rights. Of course, if the shareholders believe that it is not profitable to purchase the new shares, and it is difficult or unprofitable to transfer or sell the warrants, they can also allow the preferred warrants to expire. When a company offers stock options, it generally sets a registration date by which shareholders can acquire stock options and subscribe for new shares on a preferential basis only if they register and pay for their shares within that date. In general, shares purchased within the registration period are referred to as shares with options, whereas shares purchased after the registration date are referred to as ex-rights shares, i.e., the shares are no longer sold with options. In this way, investments in stocks purchased after the registration date are no longer accompanied by stock options. Thus, investors (including old shareholders) who purchased shares after the share registration date will not have the right to purchase shares at a lower price. In addition, in order to ensure the rights and interests of common shareholders, some companies also issue warrants - certificates that enable them to purchase a certain number of common shares at a certain price for a certain period of time (or permanently). Generally, the company's warrants are issued together with stocks and bonds, so as to attract more investors.
In summary, it is easy to see from the first two characteristics of common stock that dividends and distribution of surplus assets of common stock may fluctuate greatly, and therefore, common shareholders bear the greatest risk. Since this is the case, of course, ordinary shareholders are also more concerned about the company's operating conditions and prospects for development, and the last two characteristics of common stock is precisely to make this desire become a reality -- that is, to provide and ensure the means of ordinary shareholders concerned about the company's operating conditions and prospects for development of the power of the means. However, it is also worth noting that, in the public offering of investment and preferred shares to general investors, the company should make the investors feel that the common shares can get higher dividends than the preferred shares; otherwise, the common shares will not be able to get more than the preferred shares in terms of dividends as they both take the risk in investment, so who would still want to buy the common shares? The general company issued preferred shares, mainly to "insurance security" type of investors for the issuance of objects, for those who are more rich "spirit of adventure" investors, common stock is more attractive. In short, the issuance of these two different nature of the stock, the purpose is to attract more capital with different interests.
2. Preferred stock
Preferred stock is the symmetry of "common stock". It is a share issued by a joint-stock company that has a preference over common stock in the distribution of dividends and surplus property. Preferred stock is also a kind of unlimited right certificate, preferred stockholders generally can not ask the company in the middle of the withdrawal of shares (except for a few redeemable preferred stock). There are three main characteristics of preferred shares: First, preferred shares usually have a pre-specified dividend yield. Since the dividend rate of preferred shares is fixed in advance, the dividend of preferred shares generally will not increase or decrease according to the company's operation, and generally cannot participate in the company's dividends, but preferred shares can get dividends before common shares, and it does not affect the company's profit distribution due to the fixed dividend to the company. Secondly, the scope of rights of preferred shares is small. Preferred shareholders generally do not have the right to vote and be elected, and do not have the right to vote on the major operations of the joint-stock company, but they can enjoy the right to vote under certain circumstances. If the general meeting of shareholders of the company needs to discuss the claims related to preferred shares, that is, the claims of preferred shares are prior to common shares and secondary to creditors, the preferred shares' preferential rights are mainly manifested in two aspects: (1) the priority of dividend collection. The order of dividend distribution of the stock company is preferred shares in the first, common shares in the second. No matter how much profit a joint-stock company makes, as long as the shareholders' meeting decides to distribute dividends, the preferred shares can receive dividends according to the pre-determined dividend rate, and even if there is a general reduction or no dividend, the preferred shares should also distribute dividends as usual. (2) Preferential right to distribution of surplus assets. When a joint stock company is dissolved or liquidated in bankruptcy, the preferred shares shall have priority in the distribution of the remaining assets of the company, but the preferred shares shall have priority in the distribution after the creditors and before the common shares. Preferred shares have the right to distribution of remaining assets only if there are remaining assets after the debts of the company's creditors have been paid off. The common stock participates in the distribution only after the preferred stock claims.
There are many types of preferred stock, and there are various ways of classifying preferred stock in order to accommodate the needs of investors who specifically want to obtain certain preferential benefits. The main classifications are as follows: (1) Cumulative preferred stock and non-cumulative preferred stock. Cumulative preferred stock means that in a certain business year, if the earnings of the company are not enough to distribute the required dividends, the shareholders of the preferred stock have the right to claim the dividends paid in previous years. In the case of non-cumulative preferred shares, although the company's profit for the year has priority over ordinary shares in the distribution of dividends, the shareholders of non-cumulative preferred shares cannot ask the company to make up for it in the following years if the company does not earn enough profit to distribute the required dividends in that year. Generally speaking, cumulative preferred stock offers greater advantages to investors than non-cumulative preferred stock.
(2) Participating preferred shares and non-participating preferred shares. When corporate profits increase, in addition to enjoying the established rate of interest, you can also participate in the distribution of profits with the common stock *** with the preferred stock, called "participating preferred stock. Preferred stocks that do not participate in profit distribution, except for the established dividend, are called "non-participating preferred stocks". Generally speaking, participating preferred stock is more favorable to investors than non-participating preferred stock.
(3) Convertible and non-convertible preferred stock. Convertible preferred stock is preferred stock that allows the holder of the preferred stock to convert the preferred stock into a certain amount of common stock under certain conditions. Otherwise, it is non-convertible preferred stock. Convertible preferred stock is a type of preferred stock that has become increasingly popular in recent years.
(4) Recoverable Preferred Stock and Non-Recoverable Preferred Stock. Recoverable preferred stock is a type of preferred stock that allows the company that issued the stock to recoup the incurred preferred stock at the original price plus certain compensation. This right is often exercised when the corporation believes it can replace the incurred preferred stock with stock that pays a lower dividend. The reverse is true for nonrecoverable preferred stock.
There are three ways to recover preferred stock: (1) premium: the company in the redemption of preferred stock, although the price is specified in advance, but because this often brings inconvenience to investors, and therefore the issuing company often in the preferred stock par value and then add a "premium". (2) When a company issues preferred shares, it sets aside a portion of the funds it receives to create a "sinking fund" for the purpose of periodically redeeming a portion of the preferred shares that have been issued. (3) Conversion: Preferred shares are convertible into common shares. Although the convertible preferred stock itself constitutes a type of preferred stock, but in the foreign investment community, it is often seen as a practical way to recover the preferred stock, but the initiative to recover in the investor rather than in the company, the investor, in the market price of common stock is very favorable to do so.
3. Post-allotment stocks
Post-allotment stocks are stocks that are at a disadvantage compared to common stocks in the distribution of interest or dividends and residuals, and are generally redistributed after the distribution of common stocks. If the company's earnings are huge and the number of post-allotment shares to be issued is limited, shareholders who buy post-allotment shares can achieve high returns. Post-allotment shares are generally underutilized because the funds raised do not generate immediate income and the range of investors is limited. Post-allotment shares are generally issued under the following circumstances:
(1) when a company issues new shares to finance the expansion of equipment, the new shares are issued as post-allotment shares before the new equipment is officially put into use in order not to reduce the dividends to the old shares;
(2) when a merger takes place, a portion of the post-allotment shares are delivered to the shareholders of the merged company in order to adjust the ratio of the merger;
(3) when a government-invested company, privately-owned shares are issued as post-allotment shares, and the shareholders of the merged company can obtain a high return. government investment in a company, the dividend on privately held stock reaches a certain level before the dividend on the privately held stock is taken as a post-allotment share?