Common stock examples and types
Common stock examples are the types of stock that companies sell to individuals. These sales are done in order to raise funds for the company. By so doing, the company gives individuals the right to vote and some of the profits gained by the company.
Common stock meaning
The term “common stock” is a type of share that is issued by a company to give the owner of the share the rights of ownership in the company. One of the benefits of owning a common share is the ability to vote on company policies and on individuals who will serve on the board of directors. In the long run, common stocks give high return rates to whoever has invested in them. Although we all know the rule of business that with higher rates of returns comes higher risks. especially in the event of liquidation of the company.
What is common stock?
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Common stock examples
Financial Instrument | Common stock price |
AMTD DIGITAL | 27.80 |
BOXED INC. | 2.19 |
DINGDONG CAYMAN LTD. | 6.03 |
NORTH EUROPEAN OIL ROYALTY TRUST | 14.55 |
MESA ROYALTY TRUST | 13.88 |
STARTEK INC. | 3.27 |
CLEAR CHANNEL OUTDOOR HLD. | 1.23 |
FOUR SEASONS EDUCATION CAYMAN | 12.28 |
SOS LTD. | 5.78 |
VISTRA | 0.300 |
VIRNETX HOLDING CORP | 1.40 |
UpHealth INC. | 0.535 |
SERITAGE GROWTH PROPERTIES CLASS A | 12.00 |
CHEETAH MOBILE INC. ADS | 0.777 |
LIONS GATE ENTERTAINMENT | 8.97 |
VOLTA INC. CLASS A | 1.68 |
AVAYA HOLDINGS CORP. | 2.20 |
SUNLANDS TECHNOLOGY GROUP ADS | 5.72 |
SEACOR MARINE HLD. | 5.80 |
Common stock formula
The formula of common stock is given as:
Common stock = Number of issued shares – Treasury stocks
Where common stock is defined as the number of shares available to company owners who own a portion of the company, treasury stocks are shares that the company has purchased back, and issued shares are the total number of shares issued by the company out of the total pool of authorized shares.
Common stock examples calculation
To better understand the subject topic, let’s look at some simple to advanced examples of common stock.
Example 1
For example, company A has 5000 authorized shares, with issued shares of 2000 and treasury stock of 500. Calculate the common stock?
Using the common stock formula,
Common stock = Number of issued shares – Treasury stocks
Where;
The number of issued shares = 2000
Treasury stock = 500
Therefore,
Common stock= 2000-500 = 1500
This means that the common stock of company A is 1500.
Example 2
Another example of common stock is assuming company A, which is a US stock in the steel industry, gave the following information (authorized shares=500,000,000, issued shares=340,500,629, and treasury stock=1,156,099) in their quarterly report. What is the common stock of company A?
Using the common stock formula,
Common stock = Number of issued shares – Treasury stock
Where;
The number of issued shares = 340,500,629
Treasury stock = treasury stock = 1,156,099
Therefore,
Common stock= 340,500,629 – 1,156,099 = 339,344,530
This means that the quarterly common stock of company A is 339,344,530
Example 3
In the last example of common stock, we assume company A, which is another US stock in the steel industry, gave the following information (authorized shares=300,400,100, issued shares=177,464,375, and treasury stock=69,933) in their quarterly report. What is the common stock of company A?
Using the common stock formula,
Common stock = Number of shares issued – Treasury stock
Where;
The number of issued shares = 177,464,375
Treasury stock = treasury stock = 69,933
Therefore,
Common stock =177,464,375 -69,933 = 177,394,442
This means that the quarterly common stock of company A is 177,394,442.
Common stock types
- Blue-chip stocks
- Income stocks
- Cyclical stocks
- Defensive stocks
- Growth stocks
- Speculative stocks
- Penny stocks
There are various types of common stock that are classified based on their investment characteristics. All of these types of common stock as mentioned above represent ownership in the company in question. Some stocks are more volatile than others. Some companies pay dividends to their shareholders, while others do not. Similarly, some are recent-year investments, while others are forecasts for future-year events. In fact, these stocks are classified according to their specific investment characteristics.
Blue-chip stocks
The best kind of common stock is generally regarded to be blue-chip stocks. Blue-chip stocks aren’t specifically defined, but financial experts are aware of them. One definition of blue-chip stock that is frequently used is a business that has long-term, uninterrupted dividend payments to its shareholders over an extended period of time.
Income stocks
Common stocks classified as income stocks have paid their shareholders a higher-than-average portion of their net income after tax (NIAT). Companies that provide public utilities, like telephone, electric, and gas companies, are excellent examples of income stocks.
Cyclical stocks
Cyclical stocks are those in which the fortunes of the company are directly related to the state of the overall national economy. During an economic boom, the performance of these stocks is effective, but during a recession, their performance suffers.
The term “cyclical” does not refer to chart patterns or predictions about stock price movement. Their cyclical characteristics represent the business cycle. Steel companies, automobile manufacturers, and industrial chemical firms are examples of common stocks that are cyclical in nature. Cyclical stocks have a higher market risk than the average common stocks.
Defensive stocks
Defensive stocks are those that are thought to be safer. They may not provide the same possibility for massive gains as more aggressive stocks, but they come from sectors such as consumer staples and healthcare, which are expected to perform well in virtually any economic environment.
Growth stocks
Growth stocks are those that have a significantly higher growth rate than the market’s average growth rate. This simply means that it generates more earnings than the average common stock because of its ability to grow faster.
Speculative stocks
Speculative can be defined as making assumptions or guesses based on hearsay instead of facts and numbers. Hence, one can say that a speculative stock is a high-risk, high-reward stock with uncertain prospects.
Investors and traders can determine whether a stock is speculative or not by examining the company’s business model, which will help them determine whether it is a risky buy. Speculative stocks typically trade at a lower price than other types of stocks. Professional speculators believe the stock’s value will rise in the near future. The volatility and high reward of speculative stocks make them appealing to many short-term investors or traders.
Penny stocks
Penny stocks are a type of common stock with the following features;
- Trades at a low price
- Have a market capitalization that is very low
- Most of them cannot be liquidated
These common stock types are highly speculative and risky due to a complete lack of liquidity, a lower percentage of shareholders, substantial bid-ask spreads, and minimal information that is being disclosed.
Features of common stock
- Long-term source
- Par Value
- No maturity
- Ownership
- Limited liability
- Residual claim
- Voting right
The above-listed are the key characteristics or features of common stock.