US coal company, Westmoreland Coal Company's (NasdaqGM:WLB) board of directors authorised a dividend of USD0.53125 per depositary share, each representing one-quarter of a share of the company's series A convertible exchangeable preferred stock
, it revealed on Friday.
of Fort Smith has called for the redemption of all outstanding shares, about 1.4 million, of its $2.875 Series A Cumulative Convertible Exchangeable Preferred Stock
. The redemption date will be Sept.
Tax Options, Clienteles, and Adverse Selection: The Case of Convertible Exchangeable Preferred Stock
Thus, only issuers with comparatively poor prospects would choose convertible exchangeable preferred stock. This scenario is called the adverse selection explanation for the choice of security type.
Additionally, the company said that each depositary share being one-quarter of its series A convertible exchangeable preferred stock
share and the dividend reflects the payment of all accrued and unpaid dividends as of and through 1 January 2011.
This paper analyzes an innovation that has survived for over 15 years, convertible exchangeable preferred stock.
Convertible exchangeable preferred stock is a variant of convertible preferred stock that first appeared in 1982.
The second explanation, designated the adverse-selection hypothesis, states that some firms avoid issuing convertible exchangeable preferred stock to signal that they expect their common stock prices to rise rapidly, permitting them to force conversion early.
Also under the adverse-selection hypothesis, the common stock-price reaction to a convertible exchangeable preferred stock offering should be more negative than the reaction to a convertible preferred stock offering.
In this section, I discuss what is unique about convertible preferred stock as a capital-raising vehicle, then develop the hypotheses and their empirical implications about the motivation for issuing convertible exchangeable preferred stock versus conventional convertible preferred securities.