Definition of common stock


Two important classes of stock are common stock and preferred stock. In general, preferred stock has โ€œrights, preferences, privileges, and restrictionsโ€ that common stock does not have. Typically, investors get preferred stock, and founders and employees get common stock (or stock options).

Related terms

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Startups and Growth โ€บ Classes of Stock

The exact number of classes of stock and the differences between them can vary company to company, and, in a startup, these can vary at each round of funding.

โ€‹confusionโ€‹ Another term youโ€™re likely to hear is foundersโ€™ stock, which is (usually) common stock allocated at a companyโ€™s formation, but otherwise doesnโ€™t have any different rights from other common stock.*