---
title: "What Is Ordinary Shares?"
term: "Ordinary Shares"
description: "Ordinary shares are the standard common stock of a company—the basic equity class held by founders and employees, with voting rights and residual claim on assets after debt and preferred stock are paid."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/ordinary-shares
---

# What Is Ordinary Shares?

> Ordinary shares are the standard common stock of a company—the basic equity class held by founders and employees, with voting rights and residual claim on assets after debt and preferred stock are paid.

**Ordinary shares**—called common stock in the U.S.—are the default equity class: one share, one vote (usually), and a claim on whatever is left after creditors and preferred holders are paid.

### How it works

Founders receive ordinary shares at incorporation for cents per share. Employees exercise options into ordinary shares. Venture investors typically buy preferred shares with liquidation preferences, anti-dilution protection, and sometimes board seats. On a cap table, ordinary and preferred both count toward ownership percentages, but economic rights differ at exit.

In a acquisition, proceeds flow through a waterfall: debt, transaction costs, preferred liquidation preferences, then participation (if any), then remaining cash to ordinary holders pro rata. If the exit price is low, ordinary shares can be worth little or zero even when preferred breaks even.

Founders holding ordinary shares may also hold preferred from prior founder-friendly structures, but the default founder grant at incorporation is common. Voting control can diverge from economic ownership when dual-class or super-voting shares exist.

### Why it matters

- **Founders:** Your wealth is mostly ordinary shares. Model exit scenarios below "everyone wins" prices to see when preferences eat your upside.
- **Investors:** Preferred exists precisely because ordinary alone did not protect early risk capital; terms balance founder incentive with downside protection.

Model common proceeds at multiple exit prices before accepting stacked preferences.

### Common mistake

Assuming ownership percentage equals economic outcome. Ten percent ordinary at a $50M exit with stacked preferences may pay less than the headline suggests.

### Related ideas

Compare preferred stock, [participating preferred](/glossary/participating-preferred), liquidation preference, and [ownership percentage](/glossary/ownership-percentage).

## FAQ

### What are ordinary shares in simple terms?

They are regular company stock—not preferred shares with special liquidation rights. Founders and employees typically hold ordinary shares or options that convert into them.

### Why do ordinary shares matter?

In a sale or IPO, preferred investors often get paid first. Ordinary shareholders only participate meaningfully once preferences are satisfied, which shapes founder payout at moderate exit sizes.


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Source: https://venturecapitaltracker.com/glossary/ordinary-shares