Art, its not really all that bad. First of all once these are converted they are still non-voting and the legend will remain on the shares up to 1 year after redemption. The kicker is the warrant, and that is a non-event.
Preferred shares are just that, they have preference over common shares in certain cases. Say DCTC was to be acquired the preferred shares will be converted to common then become apart of the buyout. They are also called preferred in case a company goes under due to financial difficulties preferred shareholders get relief along with bond holders who get taken out first. Anything left over goes to shareholders. But, this is a public company so a preferred Shareholder has rights to any and all dividends which must be paid by the company, unless stated in the preferred agreement.
Preferred shares also have a debt attachment to the balance sheet depending on the structure and a few other legal E's so to speak.
A good preferred today looks like this when you read it.
The offering of this 10% Convertible Preferred A,B,C etc. redeemable in 1 year at a rate of 10% to the holder.
Meaning I invest $1,000,000 at say $5.00 per preferred share redeems me 200,000 shares plus 10% either in cash or in stock, at the time of conversion.
Preferred offering are great for companies like DCI because they raise money and the debt is booked, but it doesn't effect it Issued and Outstanding shares until redemption time. Usually in most cases they Preferred holder will want his 10% in cash and the balance in stock. The preferred itself will determine how the shares are issued. (If they are non-voting they are legend after conversion), If not it is the companies election on how the 10% is paid and how the shares are issued.
I hope this helps some what. its been awhile since I've had to look at preferred offerings. They really aren't that complicated. |
