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Yep. The rule is usually something like:
Secured Bondholders (can claim what they are secured against, so have first call)
Unsecured Bondholders (can liquidate the business if they aren't given cash)
Preferred Stockholders (first call on value of company)
Normal Stockholders (second call on value of company)
When you buy normal stock, you are buying the leftover profit.
On the other hand, the earlier stakes in the company return a more fixed return on the upside -- but have some shelter on the downside by having earlier 'call' on the companies resources.
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Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.
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