Junior equity refers to equity that ranks lower than some other form of equity. It normally refers to the common stock in a company because it is subordinate to preferred stock. Common stock ranks behind preferred stock in its claim on company dividends because dividends on preferred stock must be paid before any dividends are paid to common stock.

In the event of a bankruptcy, the holders of junior equity have the lowest claim on the company's assets. Junior equity, such as common stock, is subordinate to preferred stock, while preferred stock is subordinate to holders of bonds.