Auction rate preferred stock


Also found in: Acronyms.

Auction rate preferred stock (ARPS)

Floating rate preferred stock, whose dividend is adjusted every seven weeks through a Dutch auction.

Auction Preferred Stock

A preferred stock with an adjustable dividend that changes every seven weeks according to the results of a Dutch auction. Every preferred stock has a guaranteed dividend; an auction market preferred stock is distinguished by the fact that the amount of its dividends changes from time to time. An auction market preferred stock is beneficial for some investors because the auction reveals the current market yield every seven weeks, which helps in investment decisions on whether to buy, sell, or hold. It is also called an auction rate preferred stock or a Dutch auction preferred stock.
References in periodicals archive ?
The issue is important because it reflects on whether auction rate preferred stock is a viable financial innovation that enhances the completeness of the market, or whether it more closely resembles a "speculative balloon" slated for virtual extinction.
The approach here includes an empirical analysis of the redemption decision along with a summary of the results to a mail survey of 51 companies that have called their auction rate preferred stock for redemption.
The decision to issue auction rate preferred stock or to redeem an outstanding issue depends partially upon whether the security is the lowest cost source of capital on a risk-adjusted basis.
A well-known risk associated with auction rate preferred stock is the "failure" of an auction.
By design, the principal clientele within the market for auction rate preferred stock is comprised of corporate cash managers attempting to maximize the after-tax yield on liquid reserves.
We hypothesize that the contraction of the market for auction rate preferred stock, in part, reflects the outcome of a natural selection process by which risk-averse corporate cash managers, virtually the only participants on the demand side of this segmented market, flee the high-risk sector.
Because these limitations apply to auction rate preferred stock issued after November 17, 1989, they serve to limit the tax arbitrage opportunities available from selling new bankruptcy-remote issues.
Auction rate preferred stock dividend rates are determined through a periodic bidding process, or auction.
NII issued the MTP shares in February, 2010 to redeem in full outstanding auction rate preferred stock.
NGO issued the MTP shares in February 2010 to redeem in full outstanding auction rate preferred stock.
A committee of the board has been delegated the authority to call other auction rate preferred stocks for redemption.
Because of their short maturities and money-market characteristics, auction rate preferred stocks offer the lowest yields--roughly 2 percent to 3 percent.