Another type of investment company, the closed-end fund, does not redeem its shares but typically offers a fixed number of nonredeemable
shares that are bought and sold on a stock exchange.
In Exhibit 5, I have also applied Equation (1) to calculate the price V(bond) of a conventional nonredeemable
FNMA note implicit in the observed ISFD price and the calculated option values as of August 30, 1991.
Under this option, the issuer or holder of the nonredeemable
preferred stock will not have a "right" to redeem such stock at any time in the future, but the preferred stock will have a clause allowing the stock to become voting stock if certain financial (or nonfinancial if desired) goals are not achieved.
Some bond indentures containing anti-takeover covenants have been written in such a way that the bonds are nonredeemable
for a period of years.
Liberty said the preferred shares are voting, participating, nonredeemable
and will have preference over common shares in case the company goes out of business.
Efforts to cut off this line of attack by making pills nonredeemable
("no hand" provisions), allowing only continuing directors to redeem the pill ("dead hand" provisions), or delaying redemption for a specified time after a change in board composition ("slow hand" provisions) were invalidated by a New York court in the 1980s and by the Delaware courts in the late 1990s, (60) although these pills have been legalized in Pennsylvania, Maryland, and Georgia.
Nonvoting common stock or nonredeemable
preferred stock if the investor is able to exercise significant influence and the stock does not meet the definition in FASB Statement no.
The amounts in the Income from Premium column are derived by using the yield to maturity interest rate based on the redemption price of $110, issue price of $100, and a nonredeemable
period of five years.
Common stock, nonredeemable
preferred stock, and bonds-if the insurance enterprise is a trader in bonds having no intention of holding them to maturity-are reported at market value and the associated unrealized gains and losses are reported as a component of equity.