BROWSE

Callable Common Stock

What is 'Callable Common Stock'

A security that represents ownership in a corporation that has voting rights, whose owners are last to be paid if the company liquidates and which is redeemable by the issuing corporation, at a predetermined price or at a premium to the current market price. Typically, callable common stock is issued for a subsidiary company by its parent company. The parent company reserves the right to buy back the shares of the subsidiary company, should it become strategically beneficial.

Explaining 'Callable Common Stock'

Common stock is usually non-callable; it must be specifically designated as callable at the time of sale, if the corporation wants to have the option to redeem it. Otherwise, common stock will remain on the market indefinitely, unless the company chooses to buy back its shares on the open market, has its shares delisted or goes bankrupt.


Further Reading


A simple approximation of the value of callable convertible preferred stock
www.jstor.org [PDF]
… details about call and conversion features should be available to the financial decision maker … of issuance, ma stock at issuance, and dates when the issues first became callable … Market Value Market Value Issue/Series/ Issue Common Stock Convertible First Date Dividend Date …

Managerial ownership of voting rights: A study of public corporations with dual classes of common stockManagerial ownership of voting rights: A study of public corporations with dual classes of common stock
www.sciencedirect.com [PDF]
… details about call and conversion features should be available to the financial decision maker … of issuance, ma stock at issuance, and dates when the issues first became callable … Market Value Market Value Issue/Series/ Issue Common Stock Convertible First Date Dividend Date …

The stochastic behavior of common stock variances: Value, leverage and interest rate effectsThe stochastic behavior of common stock variances: Value, leverage and interest rate effects
www.sciencedirect.com [PDF]
… details about call and conversion features should be available to the financial decision maker … of issuance, ma stock at issuance, and dates when the issues first became callable … Market Value Market Value Issue/Series/ Issue Common Stock Convertible First Date Dividend Date …

Valuation of callable warrantsValuation of callable warrants
link.springer.com [PDF]
… details about call and conversion features should be available to the financial decision maker … of issuance, ma stock at issuance, and dates when the issues first became callable … Market Value Market Value Issue/Series/ Issue Common Stock Convertible First Date Dividend Date …

Managerial incentives and corporate investment and financing decisionsManagerial incentives and corporate investment and financing decisions
onlinelibrary.wiley.com [PDF]
… details about call and conversion features should be available to the financial decision maker … of issuance, ma stock at issuance, and dates when the issues first became callable … Market Value Market Value Issue/Series/ Issue Common Stock Convertible First Date Dividend Date …

Analyzing convertible bondsAnalyzing convertible bonds
www.jstor.org [PDF]
… details about call and conversion features should be available to the financial decision maker … of issuance, ma stock at issuance, and dates when the issues first became callable … Market Value Market Value Issue/Series/ Issue Common Stock Convertible First Date Dividend Date …

Valuing callable convertible bonds: a reduced approachValuing callable convertible bonds: a reduced approach
www.tandfonline.com [PDF]
… details about call and conversion features should be available to the financial decision maker … of issuance, ma stock at issuance, and dates when the issues first became callable … Market Value Market Value Issue/Series/ Issue Common Stock Convertible First Date Dividend Date …

Pricing the Decomposition of Callable and Redeemable Convertible Bonds with Payment of InterestPricing the Decomposition of Callable and Redeemable Convertible Bonds with Payment of Interest
en.cnki.com.cn [PDF]
… details about call and conversion features should be available to the financial decision maker … of issuance, ma stock at issuance, and dates when the issues first became callable … Market Value Market Value Issue/Series/ Issue Common Stock Convertible First Date Dividend Date …

The advantages and disadvantages of financing with preferred and common stockThe advantages and disadvantages of financing with preferred and common stock
www.irbis-nbuv.gov.ua [PDF]
… details about call and conversion features should be available to the financial decision maker … of issuance, ma stock at issuance, and dates when the issues first became callable … Market Value Market Value Issue/Series/ Issue Common Stock Convertible First Date Dividend Date …



Q&A About Callable Common Stock


How does callable common stock differ from non-callable common stock?

Non-callable common stock cannot be called back by the issuing corporation, but must remain on the market indefinitely unless it chooses to buy back its shares on the open market or goes bankrupt.

Why might you want to issue both types of stocks?

If you wanted to sell your subsidiary company at some point in time then you could sell them non-callable stocks because you know that they will always be available for purchase on an open market. However, if you wanted to keep your subsidiary company under your control then you could sell them callable stocks so that when it comes time for them to leave, you can buy them back at a predetermined price instead of having someone else take over your business."

What is callable common stock?

Callable common stock is a security that represents ownership in a corporation that has voting rights, whose owners are last to be paid if the company liquidates and which is redeemable by the issuing corporation at a predetermined price.

What does "typically" mean in this context?

Typically means most of the time. Sometimes, companies will issue both callable and non-callable stocks for their subsidiaries. In this case, they would typically have different prices depending on whether or not they were callable.

Leave a Reply

Your email address will not be published. Required fields are marked *