Talk:Preferred stock
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why companies prefer the prefered stock holders over the common stock holders to pay the dividend and other benifits? How so (i.e in the US and in Canada)?
- I don't know, but comparing it to the previous sentence, I think this sentence is about government-owned entities issuing preferred stock. Every preferred stock I know of is issued by a private company, although the preferred stock issuers Fannie Mae and Freddie Mac aren't as completely private as they might be. Art LaPella 20:35, 22 June 2006 (UTC)
should preferred stock less or more ?
- I don't understand the question. Is preferred stock better or worse than common stock? Neither - it depends on whether you value safety over a chance to get rich. Or does it mean should the article be longer? Art LaPella 19:26, 18 April 2006 (UTC)
[edit] Users
does only private companies issue prefered stock? —Preceding unsigned comment added by 202.83.170.98 (talk) 09:25, 11 December 2007 (UTC)
- In the US, yes, if you consider Fannie Mae and Freddie Mac to be private. Art LaPella (talk) 21:47, 11 December 2007 (UTC)
"...government regulations and the rules of stock exchanges discourage the issuance of publicly traded preferred shares"
As far as Canada goes, this is simply wrong. There is a very healthy population of preferred shares trading on the Toronto Stock Exchange ... I suspect that this statement, if it has any truth at all, applies only to the US, a market with which I am not familiar. JiHymas@himivest.com 21:08, 3 July 2006 (UTC)
[edit] Only/generally
The statement that preferred shares are only in financials, REITS, etc. is wrong. I presently hold HOVNP, the preferred stock of a homebuilder (not a REIT). I worked at a small high tech company that, in a time of distress, issued preferred "D" series shares at a million dollars or so par value, to gain funding to stay alive. These "D" shares were given extraorinary voting and liqidation rights (basically, they sold out the common holders to the "D" holders in exchange for capital infusion). When that wasn't enough, the "D" holder voted us into liquidation and took the Intellectual Property of the company during liquidation. (Microsoft was the holder of this "D" series. They got a great patent library as part of this deal...). So U.S. preferreds have many issuers and many uses, some defensive in takeovers, some offensive. Chiefio 16:26, 21 March 2008 (UTC) —Preceding unsigned comment added by 4.246.21.190 (talk) 15:23, 21 March 2008 (UTC)
- I didn't find a statement that preferred shares are ONLY in financials, REITS, etc. Perhaps you meant the first sentence of Preferred stock#United States: "In the United States issuance of publicly listed preferred stock is generally limited to financial institutions, REITs and public utilities." (emphasis added - generally, not only). Look over this list (I'm not sure if you can get in without registering) of typical U.S. preferred stock and see if you don't think "financial institutions, REITs and public utilities" is a good description of most of the list. Art LaPella (talk) 18:31, 21 March 2008 (UTC)
[edit] US Issuers
The explanation regarding US Issuers is informative, but is similar to the situation in Canada. The Canadian market has developed because of the dividend tax-credit and gross-up, which effectively taxes dividends at a lower rate than interest when received by the security holder. Thus, although pre-tax returns are generally lower with preferreds, after-tax returns have historically been greater. How does this relate to the US situation? JiHymas@himivest.com 00:30, 9 August 2006 (UTC)
[edit] Par value
"Preferred stock has a par value or liquidation value associated with it. This represents the amount of capital that was contributed to the corporation when the shares were first issued."
What is this? Par value is an amount set by the articles of organization or bylaws (need research as to which one) as to the value of the preferred stock. The proceeds actually contributed to the corporation is almost always higher than the par value, especially since we're talking about preferred stock here (and not common stock). The proceeds actually collected for the issuance of the stock is actually: Par value + Additional-paid-in-capital. APIC has not even been discussed in the article. --RoshSok 18:11, 18 February 2007 (UTC)
Can you give an example of an issue in which the issuance price was greater than the Par Value? Such an issue would be, at best, extremely rare in Canada. The terms would also have to be carefully described in the prospectus to avoid running afoul of the deemed dividend taxation rules on redemption. jiHymas@himivest.com 69.158.153.2 04:48, 22 February 2007 (UTC)
- How about the US preferred stock Northrop Grumman preferred B, stock symbol NOC-B, CUSIP: 666807300, prospectus link [1], par value $1.00, issuance price $100, present value around $140. Or, see Realty Income Corp., 7 3/8% Preferred D, symbol O-D, CUSIP: 756109609, prospectus link [2], par value $1.00, issuance price $25, present value closer to $26. Art LaPella 05:38, 22 February 2007 (UTC)
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- Quite right - although I confess I only looked at the Northrop Grumman link, and I will note that two examples aren't very many. I suggest the quoted text (and the next bulletted point in the "Rights" section) be changed to emphasize that par value and liquidation value are not necessarily identical, at least not in America. Is there any reason (legal, taxation or customary) why this should be the case, at least for some American corporations? jiHymas@himivest.com 216.191.217.92 16:01, 22 February 2007 (UTC)
- In my experience par value has no significance to investors or traders or their taxes. But a little web surfing turned up this quote: "Since your annual Delaware franchise taxes are based on your number of shares and their par-value, it is best to keep both of these as low as you can." [3] Delaware is the most popular state for incorporation, so par value affects the issuer's taxes. Art LaPella 20:35, 22 February 2007 (UTC)
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- Thank you! I've discussed this on my blog. jiHymas@himivest.com 216.191.217.92 22:09, 22 February 2007 (UTC)
[edit] Tier 1 Capital Question
As I understand it, a bank may issue prefs to count towards its regulatory capital. Are there any requirements regarding what it may do with these funds? Can it only be held in cash (call accoutns for example)? Zain Ebrahim 08:52, 5 June 2007 (UTC)
- Not that I'm aware of. It may not count as Tier 1 capital, however, but as Tier II. There may also be limits on how much of a bank's capital (for regulatory purposes) can be made up of preferred. It will depend on the structure of the preferred. Search for Basel accord regulatory capital for more info.--Gregalton (talk) 22:10, 11 December 2007 (UTC)
[edit] External Links: Perpetuals vs. Retractibles
I am fascinated to learn that an editor considers the article at about.com (http://beginnersinvest.about.com/cs/newinvestors/a/091602a.htm) superior (http://en.wikipedia.org/w/index.php?title=Preferred_stock&diff=170963262&oldid=170962876) to my explanation (published by third-party print media) of the difference between perpetuals and retractibles (http://www.himivest.com/media/moneysaver_0606.pdf). Any explanations and suggestions for future improvements will be greatly appreciated. jiHymas@himivest.com 216.191.217.82 (talk) 17:07, 23 November 2007 (UTC)
[edit] prefered stock preference
it is known that in world a company prefered to give dividend to the prefered stock holder instead of common stock holder. why companies prefer them on common stock holders? —Preceding unsigned comment added by 202.83.170.98 (talk) 09:30, 11 December 2007 (UTC)
- It's partly definitional: if they weren't "preferred" over common stock holders, they wouldn't be preferred. Put another way, preferred shareholders get certain advantages over common stock holders (seniority of dividends, usually "fixed" dividends in some sense) in exchange for giving up something else (like the right to vote their shares, but usually also the right to a pro-rata share of assets, earnings, etc). Conversely, common stock holders give advantages to preferred shareholders in exchange for not giving up other things, like a larger share of profits.--Gregalton (talk) 09:50, 11 December 2007 (UTC)
[edit] Canadian Issuance in 2005
It appears that a user deleted a broken link; the broken link has now been republished by svetoid. The broken link is http://www.ida.ca/Files/Media/MediaRelease/General/MRG2006020601_en.pdf and the working link is http://www.ida.ca/IDAWebsite/Files/Media/MediaRelease/General/MRG2006020601_en.pdf jiHymas@himivest.com 216.191.217.82 (talk) 21:37, 15 February 2008 (UTC)
[edit] Tel Aviv Stock Exchange
On the other hand, the Tel Aviv Stock Exchange prohibits listed companies from having more than one class of capital stock.[citation needed]
Nonsense. According to the TASE: A listed company that has one type of shares may issue or allocate shares only of the type listed for trading. A listed company whose capital includes different types of shares can allocate shares of the preferred type, in terms of voting rights. See http://www.tase.co.il/TASEEng/Listings/FollowOnOfferings/
The Industrial Development Bank of Israel Limited has four classes of capital stock listed. See http://www.tase.co.il/TASEEng/General/Company/companyDetails.htm?subDataType=0&companyID=000606&shareID=00606095 One of these classes has voting privileges - the other voting class issued by the company does not trade on the exchange. jiHymas@himivest.com 67.71.178.87 (talk) 00:45, 22 March 2008 (UTC)
Further: See the IDBI's form 20-F (at http://www.sec.gov/Archives/edgar/data/50277/000117891306001301/zk62585.htm ) filed with the SEC 2006-7-17: THE TRADING ON THE TEL AVIV STOCK EXCHANGE IN OUR ORDINARY PREFERRED SHARES AND CERTAIN CLASSES OF OUR PREFERRED SHARES MAY BE RESTRICTED AND THESE SHARES MAY EVENTUALLY BE DELISTED.
Our preferred ordinary shares, our C, CC, and CC1 shares and our capital notes are traded on the Tel Aviv Stock Exchange (TASE).
jiHymas@himivest.com 67.71.178.87 (talk) 01:03, 22 March 2008 (UTC)
[edit] Certificate of Designation
Terms of the preferred stock are stated in a "Certificate of Designation".
Huh? Never heard of it. I suspect this terminology is unique to the US. In Canada, terms of public preferred stock will be stated in a prospectus. One example of a "Certificate of Designation" may be found at http://www.sec.gov/Archives/edgar/data/1102542/000110465903023055/a03-4160_1ex3d1.htm ;
jiHymas@himivest.com 69.158.148.160 (talk) 05:44, 28 March 2008 (UTC)
- I'm an American trader, and I've never heard of a Certificate of Designation either—but they do exist according to this Google search. In the U.S., terms are also stated in a prospectus like this one. However, when I searched that document for the unfamiliar phrase "Certificate of Designation", I found it. Art LaPella (talk) 06:38, 28 March 2008 (UTC)
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- Oh, I have no doubt that "Certificate of Designations" do exist IN THE UNITED STATES ... after all, I linked to one! I have been unable to verify the existence of such a thing in any other country ... as a quick counterexample, see the prospectus for a CIBC issue at http://www.cibc.com/ca/pdf/investor/preferred-shares/series-32-prospectus-en.pdf (other prospectuses for this firm's current issues available via http://www.cibc.com/ca/investor-relations/share-info/preferred-shares/preferred-dividends.html ; any other Canadian prospectus for the last ten years or so is available via http://www.sedar.com jiHymas@himivest.com 216.191.217.82 (talk) 15:46, 28 March 2008 (UTC)
- That's apparently right - I Googled "Certificate of Designation" with SEDAR and got a short list of securities registered in both countries. Art LaPella (talk) 19:07, 28 March 2008 (UTC)
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- Um ... what is apparently right? Are you agreeing with my point that "Certificates of Designation" are unique to securities listed in, or governed by the laws of, the US, or are you agreeing with the article as written, which asserts that the terms of issue of all preferred stock, issued anywhere, are stated in a "Certificate of Designation"? jiHymas@himivest.com 69.158.148.69 (talk) 05:56, 29 March 2008 (UTC)
- I agree that "Certificates of Designation" are unique to the US. Art LaPella (talk) 19:18, 29 March 2008 (UTC)
