Coop Stock Types

What’s the difference between preferred and common stock? Will I receive a dividend? Read on for more information on the types of stock that come with Coop membership.

We have a variety of Coop membership types available, and want to take a moment to define some key terms and note important distinctions between them.

What is stock?

Units (or shares) of stock are the means through which Coop ownership is shared among members. Each individual share is part of a pool (which is just another name for “total available shares”). Our Coop, for example, has a pool of 6,000,000 shares of preferred stock and 10,000,000 shares of common stock, a total 16,000,000 available shares.

Each share of stock has a value, an assigned worth. When someone pays to join the Coop, they are paying for their ownership share of the Coop, according to its assigned value. Each share of common stock, for example, is worth $0.01, while each share of preferred stock is worth $1.00.

What does common, preferred, voting, and nonvoting stock mean?

Types of stock are commonly described as either voting or nonvoting, and as either common or preferred. Voting and nonvoting means exactly what it sounds like: The holder (owner) either has a vote in Coop governance, Board elections and so on, or not. Cooperative organizations follow a one member, one vote practice; not one share, one vote.

When it comes to common and preferred stock, each type has different benefits and abilities, which generally reflect the levels of risk and investment in each, as well as differences in control of the Coop organization itself.

Preferred stock carries certain benefits in order to attract the greater levels of investment needed to get a new organization off the ground. Investment is most needed when an organization is young, with no track record, which makes that investment inherently risky. The Coop acknowledges this investment risk by offering preferred stock with additional benefits, essentially saying: “We know you’re taking a chance on us. If we do well, holders of preferred stock will be paid a dividend first. This is our way of thanking you for helping us get started and taking a big risk on us.”

In short, preferred stock has a higher price per share ($1.00 vs. $.01) because it conveys greater benefit to those who hold it.

At the same time, outside investors may not be the same folks the Coop wants to control the direction of the organization or influence it too greatly. For this reason, holders of preferred stock cannot vote. They cannot vote to oust Board members, change the organization’s mission, nada. Preferred stock gives greater cash benefit in exchange for greater investment and risk, but less control.

Common stock, by contrast, is less risky: It requires a much lower amount of investment, which makes it accessible to a larger, more diverse group of folks. Common stock is an important way to include all of the possible people a Coop most wants as members, creating a big umbrella so that everyone who cares about and supports the Coop’s mission can own shares and, in the case of voting common stock, inform the long term direction of the Coop.

This is why we have made both voting and nonvoting, and common and preferred, types of stock available.