Common Stock

What this video covers

• Why common stock represents an ownership stake in a corporation, with one vote per share on directors, mergers, and charter amendments
• Why common stock dividends are variable and never guaranteed, even when the company posts record profits
• The strict liquidation order (secured creditors, unsecured creditors and bondholders, preferred stockholders, then common stockholders last) and who bears the highest risk in bankruptcy
• The common stock risk and return profile: downside capped at the initial investment, with unlimited upside potential
• How American Depositary Receipts (ADRs) let U.S. investors hold foreign companies through U.S. depositary banks, trading on the New York Stock Exchange (NYSE) or NASDAQ in U.S. dollars
• Why ADRs do NOT eliminate currency risk, since the underlying shares remain denominated in the foreign currency
• The additional foreign-stock risks layered onto ADRs: political, regulatory, and liquidity risk