What are “preferred” stocks? How are they different from normal (common) stocks?
It is just a different category of stock issued by a company that gives its owners different treatment when it comes to dividend payment and a few other financial transactions. Preferred stock holders get treated with some preference with regard to the company's profits and assets. For example, dividends are typically guaranteed to preferred stock holders whereas the leadership in the company can elect at any time not to pay dividends to common stockholders. In the event the company is liquidated, the preferred stockholders also get to be in line ahead of common stockholders when the assets are distributed. "I seem not to be able to comment on the first answer due to reputation, so I'll aim to enhanced the first answer which is generally good but with these caveats: 1) Dividends are not ""guaranteed"" to preferred shareholders.  Rather, preferred shareholders are normally in line ahead (i.e. in preference to or ""preferred"") of common shareholders in terms of dividend payment.  This is an extremely important distinction, because unlike investments that we generally consider ""guaranteed"" such as CDs (known as GICs in Canada), a company's board can suspend the dividend at anytime for long periods of time without significant repercussions -- whereas a missed payment to a bank or secured bondholder can often push a company into bankruptcy very quickly. 2) Due to point 1), it is extremely important to know the ""convenants"" or rules sorrounding both the preferred shares you are buying and the other more senior creditors of that issuing company (i.e. taxes (almost always come first), banks loans, leases, bonds etc.).  It is also important to know if a particular preferred share has ""cumulative"" dividends.  You generally only want to buy preferred's that have ""cumulative"" dividends, since that means that anytime the company misses a payment, they must pay those dividends first before any other dividends at the same or lower priority in the future. 3) Unlike a common stock, your upside on a preferred stock is relatively fixed: you get a fixed share of the company's profit and that's it, whereas a common shareholder gets everything that's left over after interest and preferred dividends are paid. So if the company does really well you will theoretically do much better with common stock over time. For the above reasons, it is generally advisable to think of preferred shares as being more similar to really risky bonds in the same company, rather than similar to common stock.   Of course, if you are an advanced investor there are a lot more variables in play such as tax considerations and whether the preferred have special options attached to them such conversion into common shares." I know this has already been answered and I know its frowned upon to dump a link, however, when it comes to investments it's best to get data from an 'official' source to avoid misinterpretations and personal opinions.  The attached pdf is from the S&P and provides detailed, but not overwhelming, information regarding the types of preferreds, the risks & common terminology: http://us.spindices.com/documents/education/practice-essentials-us-preferreds.pdf Page 1: PREFERRED SECURITIES DEFINED  Borrowing from two worlds, a preferred security has both equity and   fixed income  characteristics.  As such, the preferred structure   offers a flexible approach to structuring a preferred offering for an   issuer.   Companies have many reasons to issue preferred securities.  Financial   institutions, for  example, need to raise capital.  Many times they   will use the preferred market because of  any required regulatory   requirements, in addition to cost considerations.  Banks and    financial institutions are required to maintain a certain level of   Tier 1 capital—which  includes common equity and perpetual   non-cumulative preferreds—as protection against  the bank’s   liabilities.  Issuing more common equity comes at a cost, including   the dilution  of existing shares, which a company may not want to   bear.  Preferred securities are a  cheaper alternative approach to   raising the capital.  Companies often use preferred stock for strategic reasons.  Some of   these uses include:
For the case of spinoffs it reflects the market as activities as the specific steps that have to be followed take place. For example the spinoff of Leidos from SAIC in 2013. (I picked this one becasue I knew some of the details) On September 9, 2013, the Board of Directors of SAIC, Inc.(Ticker   Symbol (NYSE):SAI) approved the following:  The separation of its technical, engineering and enterprise information technology services business through the distribution of   shares of SAIC  Gemini, Inc. to stockholders.  Each stockholder of   record of SAIC, Inc. as of  September 19, 2013 (Record Date) will   receive one (1) share of SAIC Gemini, Inc. common stock for every   seven (7) shares of SAIC, Inc. common stock  held by such stockholder   as of the Record Date.   This distribution will be effective after   market close on September 27, 2013 (Distribution Date).  After the   Distribution Date, SAIC Gemini, Inc. will be renamed Science   Applications International Corporation (New SAIC). A one (1) for four (4) reverse stock split of the SAIC, Inc. common stock effective as of Distribution Date. After the Distribution Date,   SAIC, Inc. will be renamed Leidos Holdings, Inc. (Leidos). Q 11: What are the different trading markets that may occur between   Record Date and Distribution Date? A: Beginning two days prior to the Record Date of September 19, 2013   through the Distribution Date on September 27, 2013, there may be   three different trading markets available with respect to SAIC, Inc.   and the separation. Stock Ticker – SAI (Regular Way Trading with Due Bills): Shares of SAI common stock that trade on the regular-way market will trade with   an entitlement to shares of the New SAIC common stock distributed on   the Distribution Date.  Purchasers in this market are purchasing both   the shares of Leidos and New SAIC common stock. Form of Stock Ticker –SAIC (When Issued Trading): Shares of New SAIC common stock may be traded on a “when-issued” basis.  These   transactions are made conditionally because the security has been   authorized, but not yet issued.  Purchasers in this market are only   purchasing the shares of  New SAIC common stock distributed on the   Distribution Date. Form of Stock Ticker – LDOS (Ex-Distribution Trading): Shares that trade on the ex-distribution market will trade without an entitlement   to shares of New SAIC common stock distributed on the Distribution   Date.  Purchasers in this market are only purchasing the shares of   Leidos common stock. So the stock price for New SAIC starts a few days before the record date of 19 September 2013, while LDOS (new name for the old SAIC) goes back much earlier. But the company didn't split until after the close of business on 27 September 2013. http://investors.saic.com/sites/saic.investorhq.businesswire.com/files/doc_library/file/GeneralStockholder-QuestionsandAnswers.pdf "I think it's easiest to illustrate it with an example... if you've already read any of the definitions out there, then you know what it means, but just don't understand what it means.  So, we have an ice cream shop. We started it as partners, and now you and I each own 50% of the company. It's doing so well that we decide to take it public.  That means that we will be giving up some of our ownership in return for a chance to own a smaller portion of a bigger thing. With the money that we raise from selling stocks, we're going to open up two more stores.  So, without getting into too much of the nitty gritty accounting that would turn this into a valuation question, let's say we are going to put 30% of the company up for sale with these stocks, leaving you and me with 35% each. We file with the SEC saying we're splitting up the company ownership with 100,000 shares, and so you and I each have 35,000 shares and we sell 30,000 to investors.  Then, and this depends on the state in the US where you're registering your publicly traded corporation, those shares must be assigned a par value that a shareholder can redeem the shares at. Many corporations will use $1 or 10 cents or something nominal.  And we go and find investors who will actually pay us $5 per share for our ice cream shop business. We receive $150,000 in new capital. But when we record that in our accounting, $5 in total capital per share was contributed by investors to the business and is recorded as shareholder's equity. $1 per share (totalling $30,000) goes towards actual shares outstanding, and $4 per share (totalling $120,000) goes towards capital surplus.  These amounts will not change unless we issue new stocks. The share prices on the open market can fluctuate, but we rarely would adjust these. Edit: I couldn't see the table before. DumbCoder has already pointed out the equation Capital Surplus = [(Stock Par Value) + (Premium Per Share)] * (Number of Shares) Based on my example, it's easy to deduce what happened in the case you've given in the table. In 2009 your company XYZ had outstanding Common Stock issued for $4,652. That's probably (a) in thousands, and (b) at a par value of $1 per share. On those assumptions we can say that the company has 4,652,000 shares outstanding for Year End 2009.  Then, if we guess that's the outstanding shares, we can also calculate the implicit average premium per share: 90,946,000 ÷ 4,652,000 == $19.52. Note that this is the average premium per share, because we don't know when the different stocks were issued at, and it may be that the premiums that investors paid were different. Frankly, we don't care.  So clearly since ""Common Stock"" in 2010 is up to $9,303 it means that the company released more stock. Someone else can chime in on whether that means it was specifically a stock split or some other mechanism... it doesn't matter. For understanding this you just need to know that the company put more stock into the marketplace... 9,303 - 4,652 == 4,651(,000) more shares to be exact. With the mechanics of rounding to the thousands, I would guess this was a stock split.  Now. What you can also see is that the Capital Surplus also increased. 232,801 - 90,946 == 141,855. The 4,651,000 shares were issued into the market at an average premium of 141,855 ÷ 4,651 == $30.50. So investors probably paid (or were given by the company) an average of $31.50 at this split.  Then, in 2011 the company had another small adjustment to its shares outstanding. (The Common Stock went up). And there was a corresponding increase in its Capital Surplus.  Without details around the actual stock volumes, it's hard to get more exact. You're also only giving us a portion of the Balance Sheet for your company, so it's hard to go into too much more detail. Hopefully this answers your question though." "In most cases, the other classes of shares are preferred stock (example, JPM-F). Preferred stock usually pays higher dividends and shareholders get preferential treatment in the event that the company goes under. (Preferred shareholders are behind bondholders in line, but ahead of common stock holders) In other cases, different classes of shares have different voting rights or pricing. Examples include Berkshire Hathaway B shares. In the case of Berkshire Hathaway B shares, the stock has 1/500th of the rights and 1/10,000th of the voting rights of an ""A"" share.  You need to be cautious about investing in anything other than common stock -- make sure that you understand what you are getting into. This is not to say that other share classes are 'bad' -- just that many preferred stocks are thinly traded and are difficult to buy and sell." Preferred stocks are, err... Preferred. The whole point of preferred stocks is that they have some preference over other classes of stocks (there may be more than 2, by the way). It can be more voting rights, more dividends or priority on dividends' distribution (common with VC investments), or priority on liquidations (in bankruptcy, preferred stock holders are ranked higher than common). Many times initial or critical investments are made on preferred terms, and the stocks are converted to common when certain thresholds are met. Obviously all these benefits require a premium on the price. Two more esoteric differences, related to the same cause... When you have an outstanding debit balance in a margin the broker may lend out your securities to short sellers.  (They may well be able to lend them out even if there's no debit balance -- check your account agreement and relevant regulations).   You'll never know this (there's no indication in your account of it) unless you ask, and maybe not even then. If the securities pay out dividends while lent out, you don't get the dividends (directly).  The dividends go to the person who bought them from the short-seller.  The short-seller has to pay the dividend amount to his broker who pays them to your broker who pays them to you.  If the dividends that were paid out by the security were qualified dividends (15% max rate) the qualified-ness goes to the person who bought the security from the short-seller.  What you received weren't dividends at all, but a payment-in-lieu of dividends and qualified dividend treatment isn't available for them.   Some (many?  all?) brokers will pay you a gross-up payment to compensate you for the extra tax you had to pay due to your qualified dividends on that security not actually being qualified. A similar thing happens if there's a shareholder vote.  If the stock was lent out on the record date to establish voting eligibility, the person eligible to vote is the person who bought them from the short-seller, not you.  So if for some reason you really want/need to vote in a shareholder vote, call your broker and ask them to journal the shares in question over to the cash side of your account before the record date for determining voting eligibility. "Some investment trusts have ""zero dividend preference shares"" which deliver all their gains as capital gains rather than income, even if the trust was investing in income yielding stocks. They've rather gone out of fashion after a scandal some years ago (~2000).  Good 2014 article on them here includes the quote  ""Because profits from zero dividend preference shares are taxed as   capital gains, they can be used tax efficiently if you are smart about   how you use your annual capital gains tax allowance.""" "So, the term ""ready market"" simply means that a market exists in which there are legitimate buy/sell offers, meaning there are investors willing to own or trade in the security. A ""spot market"" means that the security/commodity is being delivered immediately, rather at some predetermined date in the future (hence the term ""futures market"").  So if you buy oil on the spot market, you'd better be prepared to take immediate delivery, where as when you buy a futures contract, the transaction doesn't happen until some later date.  The advantage for futures contract sellers is the ability to lock in the price of what they're selling as a hedge against the possibility of a price drop between now and when they can/will deliver the commodity.  In other words, a farmer can pre-sell his grain at a set price for some future delivery date so he can know what he's going to get regardless of the price of grain at the time he delivers it.  The downside to the farmer is that if grain prices rise higher than what he sold them for as futures contracts then he loses that additional money.  That's the advantage to the buyer, who expects the price to rise so he can resell what he bought from the farmer at a profit. When you trade on margin, you're basically borrowing the money to make a trade, whether you're trading long (buying) or short (selling) on a security.  It isn't uncommon for traders to pledge securities they already own as collateral for a margin account, and if they are unable to cover a margin call then those securities can be liquidated or confiscated to satisfy the debt.  There still may even be a balance due after such a liquidation if the pledged securities don't cover the margin call. Most of the time you pay a fee (or interest rate) on whatever you borrow on margin, just like taking out a bank loan, so if you're going to trade on margin, you have to include those costs in your calculations as to what you need to earn from your investment to make a profit. When I short trade, I'm selling something I don't own in the expectation I can buy it back later at a lower price and keep the difference.  For instance, if I think Apple shares are going to take a steep drop at some point soon, I can short them.  So imagine I short-sell 1000 shares of AAPL at the current price of $112.  That means my brokerage account is credited with the proceeds of the sale ($112,000), and I now owe my broker 1000 shares of AAPL stock.  If the stock drops to $100 and I ""cover my short"" (buy the shares back to repay the 1000 I borrowed) then I pay $100,000 for them and give them to my broker.  I keep the difference ($12,000) between what I sold them for and what I paid to buy them back, minus any brokerage fees and fees the broker may charge me for short-selling. In conclusion, a margin trade is using someone else's money to make a trade, whether it's to buy more or to sell short.  A short trade is selling shares I don't even own because I think I can make money in the process. I hope this helps." "(Note: out of my depth here, but in case this helps...) While not a direct answer to your question, I'll point out that in the inverse situation - a U.S. investor who wants to buy individual stocks of companies headquartered outside US - you would buy ADRs, which are $-denominated ""wrapper"" stocks.  They can be listed with one or multiple brokerages. One alternative I'd offer the person in my example would be, ""Are you really sure you want to directly buy individual stocks?""  One less targeted approach available in the US is to buy ETFs targeted for a given country (or region).   Maybe there's something similar there in Asia that would eliminate the (somewhat) higher fees associated with trading foreign stocks."