Share class is the type of equity granted, with common typically being the lowest class of share.
A share class is a category of stock that a company issues to investors. Each class of shares typically has its own set of rights and privileges. Understanding the different types of share classes and their characteristics is important for investors who are looking to invest in a company.
The most common types of share classes are common shares and preferred shares.
Common shares represent ownership in a company and typically entitle the holder to vote on matters of corporate governance, such as the election of directors. Preferred shares, on the other hand, generally do not have voting rights but may have priority over common shares in receiving dividends and in the event of a liquidation.
In terms of rights and privileges, common shareholders have the right to vote on the company's board of directors, and other matters that affect the company. They also have the right to receive dividends if the company declares them. Preferred shareholders typically have a higher claim on the company's assets and earnings than common shareholders, but they don't have voting rights.
Share classes also affect the ownership and control of a company. Common shareholders have voting rights and therefore they have some control over the company's management, but they generally have less control than preferred shareholders.
Share classes also affect the liquidity and marketability of a company's stock. Common shares are generally more liquid and easier to trade than preferred shares. This is because common shares are more widely held and traded, so there is a larger pool of buyers and sellers for common shares.
Share classes can also affect the valuation of a company. Preferred shares are generally considered less risky than common shares, and therefore they may be valued differently by investors. This can affect the overall valuation of the company.