Junior Equity

Written By
Paul Tracy
Updated November 4, 2020

What is Junior Equity?

Junior equity is an issuance of stock that is subordinate to other stock issued by a company.

How Does Junior Equity Work?

For example, if Company XYZ issues preferred stock, those shares are senior to Company XYZ's common stock shareholders. This means that should Company XYZ go bankrupt, the preferred shareholders are entitled to repayment before the common shareholders are. The common stock is therefore the junior issue.

Why Does Junior Equity Matter?

Owners of senior equity get their hands on leftover cash before others in the event of bankruptcy. Accordingly, owners of junior equity (those further down in the pecking order) are more likely to get stiffed. That is, the more subordinate an owner or issuer is, the weaker its claim on the company's assets. This is why the more junior the equity is, the higher the return investors demand.

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Junior Equity.
Be the first to ask a question

If you have a question about Junior Equity, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about Junior Equity, then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Junior Equity

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms