A callable preferred stock that which doesn’t allow the investor (holder) to convert into common stock. However, the issuer has the right to redeem (buy back) the preferred stock at a preset price and a specified date. When the issuer redeems the preferred stock, no common stock is issued instead. A company might give the holders of its preferred stock the right to give back (i.e., put) the stock and get back their investment. In this case the preferred stock is said be puttable. Redemption by the issuer means that only the investors’ common stock will remain on its balance sheet.
This type of preferred stock is also known as a redeemable nonconvertible preferred stock.
Comments