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Junior Equity

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Junior equity is equity that ranks lower than some other equity; more specifically, junior equity is called common stock. Junior equity is called "junior" for any of several purposes. Junior equity ranks behind preferred stock in its claim on company dividends; the latter are promised and guaranteed, while the former depend on either the profits of the company or a decision handed down from the company's board of directors. In the event of bankruptcy, the holders of junior equity have a lower claim on the company's assets (and are behind bondholders and other debtholders). The term does not apply to voting rights, however. Except in the case of a narrow class of preferred stock, junior equity has all voting rights.



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