Ordinary share definition
Ordinary shares, also known as common shares, are issued by publicly listed companies. Typically, the shareholders are entitled to one vote per share, and any ordinary dividends paid by the company. The other type of shares listed companies may offer are preferred shares.
Ordinary shareholders would come behind bondholders and preferred shareholders, if a company unwinds and there’s a need to distribute any residual value. Therefore, ordinary shareholders are considered unsecured creditors.
While they face greater risk than bondholders and preferred shareholders, the potential rewards are higher. That’s because while bondholders and preferred shareholders receive fixed coupons and dividends, respectively, ordinary shareholders will divide the residual payout among themselves. That payout may be far greater than the fixed payout.