Common Stock Equivalent

You get a job with a public tech company. They give you stock options, incentivizing you to stay with the company, and for employees at the company to perform well. If the stock goes higher, everyone with stock and stock options will make more money.

When the day comes to exercise those stock options, you’ll convert them into actual shares of the firm’s common stock. Because these securities can be converted to stock, they are referred to as common stock equivalent.

There are many different common stock equivalents. Thinks bonds, warrants, stock options, and preferred bonds.