A stock market is a public market for the trading of company stock and other securities at an agreed price. Stock is the share of ownership of a company. The most common securities you can buy listed in the stock market are common stocks. However, there are other types of securities such as preferred stocks, warrants, PDRs and bonds which are also traded.
- Common Stocks – Common stock is a form of corporate equity ownership, a type of security. It is called “common” to distinguish it from preferred stock. In the event of bankruptcy, common stock investors receive their funds after preferred stock holders, bondholders, creditors, etc. On the other hand, common shares on average perform better than preferred shares or bonds over time.
- Preferred Stocks – Its name is derived from preference given to the holders of these stocks over holders of common stocks. Holders of preferred stocks are entitled to receive dividends, to the extent agreed upon, before any dividends are paid to the holders of common stocks. However, preferred stocks usually have a specified limited rate of return or dividend and a specified limited redemption and liquidation price.
- Warrants – A corporation can also raise additional capital by issuing warrants. A warrant, normally issued on a detachable basis, allows its holders the right, but not the obligation, to subscribe to new shares at a set price during a specified period of time. It is usually provided free of charge and traded separately in the securities market.
- Philippine Deposit Receipts (PDRs) – A PDR is a security which grants the holder the right to the delivery or sale of the underlying share, and to certain other rights including additional PDR or adjustments to the terms or upon the occurrence of certain events in respect of rights issues, capital reorganizations, offers and analogous events or the distribution of cash in the event of a cash dividend on the shares. PDRs are evidences or statements nor certificates of ownership of a foreign/foreign-based corporation. For as long as the PDRs are not exercised, the shares underlying the PDRs are and will continue to be registered in the name of and owned by and all rights pertaining to the shares shall be exercised by the issuer.
- Small-Denominated Treasury Bonds (SDT-Bonds) – The SDT Bonds are long-term and relatively risk-free debt securities issued by the Bureau of Treasury (BTr) of the Republic of the Philippines. The bond is a certificate of indebtedness of the Republic of the Philippines to the owner of the SDT-Bonds.
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