LEGAL RIGHTS
AND PRIVILEGES
OF COMMON
STOCKHOLDERS
COMMON STOCK
 It represents ownership in the
corporation.
 Control of the firm
Preemptive Right
A provision in the corporate charter or
bylaws that gives common stockholders the
right to purchase on a pro rata basis new
issues of common stock (or convertible
securities).
TYPES OF COMMON STOCK
Classified Stock
Common stock that is given a special designation such as Class A or Class B
to meet special needs of the company.\
Founders’ Shares
Stock owned by the firm’s founders that has sole voting rights but restricted
dividends for a specified number of years.
STOCK PRICE VS. INTRINSIC VALUE
STOCK PRICE refers to the current price
that a share of stock is trade at on the
market or the price negotiated between a
seller and a buyer.
INTRINSIC VALUE is an estimate of the
actual value of a company's stock
different from how the market values it
unlike the stock price.
STOCK PRICE VS. INTRINSIC VALUE
Two basic models
the discounted dividend model and the
corporate valuation model.