We are all by now familiar with the term stock. Stocks are usually traded on exchanges, there being places where sellers and buyers meet and decide on a certain price. Currently, stocks can be traded in physical locations where all the transactions are handled on a trading floor, as well as virtually, which entails trading in stocks using a network of computers where all the transactions are handled electronically. However, most people have very little knowledge on what stock certificates are the types and their functions. As such, we will be discussing about the different types of stock certificates but first let us go through the various types of stocks that are currently being offered by different companies.
Types of Stocks
There are two main types of stock: preferred stocks and common stocks.
1. Preferred stock – This type of stock represent some degree of ownership in a number of certain company’s stock but doesn’t entitle someone to voting rights, but this entirely depends on the company. With this type of stock, one is guaranteed a fixed dividend for as long as they continue holding on the stock. In the event of liquidation, shareholders of preferred stocks are usually paid off before common shareholders, which is after all the debts have been serviced.
2. Common stocks – On the other hand, this type of stock is the most common one, and usually when people talk of stocks, they refer to this one. This type of stocks means that one has a share/owns part of the company, and as such they are entitled to a claim (dividend) on a portion of the profits. With this type of stock, a shareholder gets one vote whenever elections are held to elect board members, who in most cases oversee the major decisions that are to be made by the management.
In most cases, whether common or preferred stocks, their valuation can either be par-value or non-par-value.
3. Par value stocks,
Also known as, face value or nominal value indicates exactly what one ought to pay for every share and in most cases; the value assigned is usually fixed.
4. Non-par-value stocks
Non-par-value stocks on the other hand represent stocks that are offered without a fixed value indicated on them. Their valuation is often dictated based on what the investors are willing to pay.
Types of stock certificates
Stock certification from the word ‘stock certificate; a physical piece of paper representing certain ownership in a company’ is the process where one is issued with a certificate to indicate that indeed own the said number of shares in that given company. Most stock certificates comes fully embedded with the number of shares one holds, date purchased/issued, a corporate seal, and signature, and are often a bit larger than normal piece of paper, with a rare design intended to discourage fraudulent duplication. There are four main types of stock certificate, which include:
1. Registered stock certificates – This type of certificates shows the owner’s name, number of share owned, date issued, CUSIP number, stock certificate number, and the transfer agent.
2. Bearer stock certificates – This type of certificate does not show the owner’s name or title, and they are often issued with bonds are somewhat impossible to replace if stolen or lost, and as such, they are almost obsolete.
3. Book Entry – Nowadays, most companies offer book entry stock certificates only. This literally means that there are no physical records or certificate kept by the bank, brokerage firm or transfer agent. They thus work with CDs and bonds.
4. Street Name – Street name stock certificate keeps track of the stock electronically, and just like, with Book Entry they do not come with any physical certificate.