Preferred Shares

Preferred shares:

  • owner entitled to
    • a dividend (fixed or floating) before any dividends paid to common shareholders
    • a stated dollar amount per share upon liquidation of the company
  • generally no voting rights
  • no legal obligation to pay dividends but moral obligation, since missing payments
    • reduces market value of outstanding securities
    • impedes ability to raise future financing
  • types
    • cumulative: a dividend that is a missed may accumulate for payment later
    • non-cumulative: no rollover (missed = missed)
    • participating: receive preferred dividends + common share dividends
    • convertible: can convert to common shares (generally) under certain conditions
    • redeemable: Corporation and redeem at a set price under certain conditions

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