Also known as: equity security · equities
Written by attorneys · grounded in primary & secondary sources — see below
Ownership interests in a corporation issued in the form of shares. These interests confer on holders proprietary claims to the corporation's assets and earnings and represent the units into which ownership of the corporation is divided.
Edgewater Capital threatened to sell a block of equity securities in Elemental Pharmaceuticals to a competitor. Elemental sued for tortious interference and sought an injunction. The court weighed the hardship an injunction would impose on Edgewater against the harm Elemental would suffer without it and denied the injunction after finding the balance tipped against relief.
Edward Everett quietly accumulated equity securities in Everest Holdings until his stake exceeded five percent. He filed the required Schedule 13D disclosing his intentions. The filing prompted a sharp rise in the trading price of the equity securities as the market reacted to the potential control contest.
Select any source to read its text and confirm it supports the definition.
Emma Erickson bought equity securities in Empire Logistics after a misleading press release. She later sought an injunction to block a proposed merger. The court held that she lacked standing because she could not show the requisite injury traceable to the disclosure violation.
Elliot Edmonds received a tip about upcoming negative news at Elemental Pharmaceuticals and sold his equity securities before the disclosure. The SEC pursued him for insider trading. The court ruled that liability required proof he knew the tipper breached a duty in disclosing the information.
Eugene Ellsworth owned equity securities in Edgewater Capital and alleged the proxy statement for a merger vote contained material misstatements. He sued under the securities laws. The court recognized an implied private right of action allowing shareholders to enforce the proxy rules through damages claims.
Ethan Evans purchased equity securities in Everest Holdings at an inflated price after misleading statements by the company. He later sued for securities fraud. The court applied the fraud-on-the-market presumption, allowing him to rely on the integrity of the market price without proving direct reliance on each statement.
Equity securities represent ownership interests in the form of shares that give holders proprietary claims on corporate assets and earnings. Debt securities represent loans that must be repaid regardless of corporate performance. The distinction affects risk allocation, repayment obligations, and priority in bankruptcy.
Supporting sources
A corporation issues equity securities when it sells ownership interests directly to investors. The corporation itself is the issuer. Issuance creates the shares that represent the proprietary interests divided among owners.
Supporting sources
Corporations with a class of equity securities registered under section 12 of the Securities Exchange Act of 1934 must comply with additional disclosure and governance requirements. These rules include obligations to appoint inspectors for shareholder meetings and to file reports that affect trading in the equity securities.
Supporting sources
…section stemmed from the congressional belief that “[f]air corporate suffrage is an important right that should attach to every equity security bought on a public exchange.” H. R. Rep. No. 1383, 73d Cong., 2d Sess., 13. It was intended to “control the conditions under which proxies may be solicited with a view to preventing the…