Stock Valuation Essay Example | Topics and Well Written Essays - 250 words - 2

Stock Valuation - Essay Example Common stockholders are entitled to voting where shareholders come together and are recipients of dividends while a preferred stock is a bond at the same time, that is, it is a cross between a common stock and a bond (Damodaran, 2007). Some of its characteristics include scripted return, lack of maturity in most cases, ability to recover as a mature bond and conversion to a common stock. In case of company bankruptcy, preferred stock holders are a priority in the payment of liquidated assets then the common stockholders. A direct implication of this is that the former mentioned stock preference is high regarding liquidation and some of its dividends are preferred. There are instances where dissolving a company results to no payments to the common stockholder. Therefore holding the same value for stock by investors goes against the principles of the two kinds of stocks in discussion. An imbalance of the stock market is therefore inevitable in the long