What does converting preferred shares to common equity mean to stock holders? and Stock Trading - End of Day

What does converting preferred shares to common equity mean to stock holders?

Citigroup is doing this...Is this going to cost stock holders money?


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Answer by Mo
Preferred stock has more advantages in issues such as dividend payments and bankruptcy filings.

With regards to dividends, preferred stockholders receive them first. And with regards to bankruptcy, preferred stocks are considered debentures (or instruments of debt), thus making them creditors, and higher on the list of people to get paid post-bankruptcy.

Preferred shares are sold at $ 1,000 par value, common shares at $ 1 par (this doesn't have to be the case anymore)..

Converting the shares to common equity reduces the debt obligations of the issuing corporation.

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