I've been out of town, and I see that Michael and Hal have given some good answers to your questions, but I'll throw in a few tidbits:
The convertible preferred can be converted at any time by the holder and the conversion price is fixed at 4. If you held the convertible you could 1) convert and sell the stock, presumably when the price is above 4, 2) short the stock (again, presumably when the stock is above 4) and continue to hold the convertible just in case preferred dividends are declared, 3) Convert and hold the common, or 4) Continue to hold the preferred until AXC liquidates it at face value, but this only makes sense if the price is under $4.
The redeemable issue is much different. If you hold it, all you can do is hold it and wait to see what happens. It is Ampex that has choices. They must redeem the preferred (i.e. buy it back at face value). They can redeem in cash, or in stock, and if in stock at the higher of $2.50 or face value. If the stock is under $2.50, it would seem logical to redeem with stock at $2.50. Above $2.50 they could use either stock or cash. The trick is that if they use stock, the price is not fixed. This can create an incentive for the holder to short the stock prior to the redemption date because if he can drive down the stock price, he gets more shares. Worse, the market could anticipate this happening, and traders could join in, selling the stock a month before the redemption date, and buying immediately thereafter. Thus even if the actual effect to too weak to do anything to the stock price it is still possible that the effect could happen anyway as traders jump on the bandwagon.
As for risk, I don't think that the redeemable is a significant additional risk factor at this time.
Carl
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