What Is Redeemable Preferred Stock?

Redeemable preference shares are also called "repurchaseable preference shares." The "irredeemable preferred stock" symmetry. The company may repurchase preferred shares at a certain price after the shares have been issued for a period of time in accordance with the agreed terms. Mainly in the United States, Britain and other developed countries. Its main feature is that the issuing company has the right to repurchase shares at a certain price after a period of time after the issuance of the preferred shares in accordance with pre-agreed conditions. Most types of preferred stock are redeemable; they usually have stock redemption clauses that specify the minimum period from the issue to redemption of the stock, the redemption price, the method of redemption, etc .; the purpose of the company's redemption of preferred stock , Generally to reduce the burden of dividends, is usually redeemed when lower preference stocks can be used to replace issued preference shares. There are three main types of redemption: Premium redemption. That is, based on the price specified in advance, a premium (compensation) will be redeemed at the par value of the preferred shares. Fund compensation. That is, after the company issues preferred shares, it will set aside a portion of the funds from the received share capital or company profits, and set up a compensation fund to be used as compensation funds for redemption of preferred shares. Conversion redemption. That is, the company redeems the preferred shares by converting them into ordinary shares. ^[1]

Redeemable preference shares

Right!

Redeemable preference shares are also called "repurchaseable preference shares." The "irredeemable preferred stock" symmetry. The company may repurchase preferred shares at a certain price after the shares have been issued for a period of time in accordance with the agreed terms. Mainly in the United States, Britain and other developed countries. Its main feature is that the issuing company has the right to repurchase shares at a certain price after a period of time after the issuance of the preferred shares in accordance with pre-agreed conditions. Most types of preferred stock are redeemable; they usually have stock redemption clauses that specify the minimum period from the issue to redemption of the stock, the redemption price, the method of redemption, etc .; the purpose of the company's redemption of preferred stock , Generally to reduce the burden of dividends, is usually redeemed when lower preference stocks can be used to replace issued preference shares. There are three main types of redemption: Premium redemption. That is, based on the price specified in advance, a premium (compensation) will be redeemed at the par value of the preferred shares. Fund compensation. That is, after the company issues preferred shares, it will set aside a portion of the funds from the received share capital or company profits, and set up a compensation fund to be used as compensation funds for redemption of preferred shares. Conversion redemption. That is, the company redeems the preferred shares by converting them into ordinary shares. ^[1]

Callable

There are two types of redeemable preference stocks: forced redemption and arbitrary redemption.

1. Mandatory redemption

Mandatory redemption, that is, when the shares are issued, the joint stock company has the option to redeem or not. Once the company issuing the stock decides to redeem it on the required terms, shareholders have no choice but to return the stock. And stockholders do not have any initiative.

2. Arbitrary redemption

Arbitrary redemption, that is, shareholders have the right to choose whether to require the company to redeem. If the shareholders are unwilling to continue to hold the stock within the prescribed period, the joint stock company must not refuse to buy back on the redemption terms.

In reality, most redeemable shares belong to the first category, and the initiative to redeem is in the hands of joint stock companies. The purpose of stock companies to redeem preferred stock is generally to reduce the burden of dividends. As a result, redemptions are often issued when lower preference stocks can be used to replace issued preference stocks. The redemption price is specified in advance and is usually higher than the stock market value. The purpose is to compensate shareholders for the losses that may be caused by the stock being redeemed, protect the interests of stock holders, and also regulate the redemption behavior of stock companies .