Microsoft Preferred Stock Offering: Q&A
What is preferred stock? Preferred shares carry a dividend and
have prior claim over common shares on any dividends and
corporate assets issued by the company. These preferred shares
will have no voting rights.
What is "convertible exchangeable principal-protected preferred
stock" This type of convertible preferred stock is a financial
instrument that combines elements of a common stock with elements
of preferred stock. This long title is a financial technical term
for what many investors look for in a high-grade preferred stock.
"Convertible" means that these preferred shares convert into
common shares after three years. "Exchangeable" means that these
shares can eventually be exchanged into debt that pays interest
rather than dividends.
The "Principal-protected" feature means that at the time of
maturity, the investor will receive no less than the par value at
which it is initially offered; in this case, $79 7/8. At the same
time, investors in this preferred stock have a capped upside
compared to the common stock. This cap has been set at 28% over
three years, or $102.24.
This type of security provides holders with a scheduled current
income return and downside protection, in exchange for a capped
upside.
What are the pricing details on the Microsoft preferred stock
offering?
Total offering: $1 billion
Price: $79 7/8 per share (closing price of MS
common stock on Dec 17)
Dividend rate: 2.75% per annum
Upside cap: 28% over 3 years, or $102.24
Floor: $79 7/8 per share
What is the dividend rate? The dividend rate has been set at
2.75% per year (approx. $2.20 per share). Dividends are
cumulative and payable quarterly in arrears. "Cumulative" means
that dividend rates are defined in advance and provide some
guarantee of payment.
Why is Microsoft issuing preferred stock? This is the first time
Microsoft has issued preferred stock. The stated purpose for the
proceeds of this offering is to repurchase common stock.
Additionally, some potential investors have expressed an interest
in receiving a dividend on Microsoft stock, and some investors
will only invest in income-yielding companies. This offering of
preferred stock gives those investors a vehicle that allows them
to participate in the potential growth of our company, while also
What is the dividend rate? The dividend rate has been set at
2.75% per year (approx. $2.20 per share). Dividends are
cumulative and payable quarterly in arrears. "Cumulative" means
that dividend rates are defined in advance and provide some
guarantee of payment.
Why is Microsoft issuing preferred stock? This is the first time
Microsoft has issued preferred stock. The stated purpose for the
proceeds of this offering is to repurchase common stock.
Additionally, some potential investors have expressed an interest
in receiving a dividend on Microsoft stock, and some investors
will only invest in income-yielding companies. This offering of
preferred stock gives those investors a vehicle that allows them
to participate in the potential growth of our company, while also
receiving dividend income. As with any investment decision,
people who are considering purchasing Microsoft preferred stock
should contact their own tax and investment advisors and
thoroughly read the offering prospectus.
When did Microsoft begin issuing preferred stock? The first day
of the preferred stock offering was Wednesday, December 18, 1996.
The initial price of the preferred stock was set at the closing
price of the common stock on Tuesday, Dec. 17: $79 7/8.
What is the stock symbol for Microsoft preferred stock? The stock
symbol for Microsoft preferred is MSFTP. The stock symbol for
Microsoft common is MSFT. |
