Characteristics of Common Stock
Chapters in this video
- 0:00 Equity ownership and no maturity date
- 2:04 Residual claim and the liquidation payout order
- 2:34 Limited liability and the personal-assets trap
- 3:40 Freely transferable shares on the secondary market
- 4:05 Transfer agent versus registrar roles
- 4:38 The independence requirement exam trap
- 5:14 Rapid-fire exam recap
What this video covers
- Why common stock is an equity ownership interest with no maturity date, and how that drives both unlimited upside and maximum downside risk
- What "residual claim" actually means in a corporate liquidation, and the exact payout order: creditors, bondholders, preferred stockholders, then common stockholders
- How limited liability caps a shareholder's loss at 100% of the purchase price and shields personal assets from corporate creditors
- Why common stock is freely transferable on the secondary market, and the exception for control stock or restricted stock under the restricted-stock resale rule
- The role of the transfer agent: maintaining shareholder records, canceling and issuing certificates, paying dividends, and sending proxies
- The role of the registrar: auditing the transfer agent and verifying share counts to prevent over-issuance
- The independence requirement: why the transfer agent and registrar must always be separate entities
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