Common Stock Equivalent

Common Stock Equivalent - The common stock equivalent is a company or corporation's preferred stock or bond that is convertible, or can be exchanged into, common stock. This is especially important if the stock is trading like an equity issue, as usually the optioned company or corporation's common stock or share price is much higher than the preferred stock or bond price. At this time, the ownership interest in the corporation or company's common stock is much more preferred by the company or corporations stockholders, as they welcome the higher return and usually will exchange their preferred stock in favor of common stock.