What is paying for playing?

Pay for play is a term used in a number of situations of shares financing and often concerns the rights and privileges extended to investors as a result of their financial interest in the company. The provisions of this type are usually listed in charter documents issuing a company and also in terms of conditions defined in the agreements on the purchase of shares associated with the initial purchases carried out by shareholders. Within the agreement, investors who hold certain types of shares are obliged to participate in any stock bids that take place after its initial investment is completed. In the event that the investor decides not to participate in one of these subsequent offers, certain benefits associated with the provision of pay for playback are selected and usually cannot be recovered.

One of the more common strategies associated with the salary for playing on the purchase of shares is the ability for the investor to be protected from possibleOkay that the value of its interest in dilution of the company, because other stocks are offered on the market. Since the provision requires the shareholder to participate in new stock offers, and preference is often granted in this participation, the ability to maintain or a percentage of the Company is ensured in this participation. This is sometimes referred to as anti -loss protection , because the payment for playing allows you to maintain the level of interest in the company over time, which is often key to long -term strategies of key investors.

In the event that the shareholder decides not to use this remuneration to play the privilege, protection against the possible dilution of the percentage of interest in the company is usually lost. From now on, there is no automatic preference granted to the investor in terms of participation in new stocks. If he wants to buy additional shares, it is only possible to do so after accessing shares on the stock exchange and at the current market price.

Given that payment for playing is often associated with preferred AKCIemi, there is also the possibility that the decision not to participate in the subsequent offices of the shares will cause the conversion of preferred shares into ordinary shares. This means that investors who are experiencing conversion no longer have access to a fixed dividend offered by preferred shares. In addition, shareholders have favored status if the company is forced to undergo the liquidation of their assets in the future.