Preferred stocks : a critical study of the preferences given corporate industrial capital securites



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The subject of the present inquiry is "Preferred Stocks: A Critical Study of the Preferences Given Corporate Industrial Capital Securities." For the purpose of this study a selected list of industrial preferred stocks has been submitted to an intensive examination with the following objectives in view: 1. To present an analysis of industrial preferred stock provisions as they are actually employed by the issuing corporations. 2. To discuss the most significant phases of industrial preferred stock financing from the investment, legal and economic points of view. 3. To appraise the contractual provisions of industrial preferred stock in regard both to their theoretical and their actual usefulness to the investor. A study of this nature appears desirable because of the singular neglect of preferred stocks in the literature of corporation finance. Volumes have been written on principles of investment in common stocks and bonds, while preferred stocks have received only incidental or general treatment with but a few special studies of certain phases of preferred stock contracts. In this trinity of corporate securities, preferred stock appears to be the Cinderella. [...] In the preparation of this study, the contractual provisions of 589 preferred stocks were examined and classified. Of these issues 302 were those of industrial companies; 128, those of railroads; and 159, those of public utilities. The industrial preferred stocks included all of the preferred issues, both active and inactive, which were listed on the New York Stock Exchange as of June 30, 1932. The railroad issues comprised all of the preferred stocks listed in Moody's Steam Railroads for 1932 for railroads which operated at least fifty miles of trackage. In the case of the public utilities, an analysis was made of all preferred stocks found in Moody's Public Utilities for 1932 which were listed on the most important stock exchanges in the United States. Due to the fact that the data in regard to the steam railroad and public utility preferred stocks was to be largely comparative in nature, no attempt was made to obtain original material. In the case of the industrial preferred stocks, however, original data has been employed throughout. These original sources consist primarily of charters and by-laws obtained directly from the companies themselves. In some cases, only extracts from these were obtained, consisting of photostatic copies, typewritten copies, and specimen stock certificates with the provisions printed thereon. Where the preferred stocks were originally offered by an investment banking firm, an effort was made also to secure the offering circulars. Of particular usefulness, too, were the New York Stock Exchange Listing Applications, of which complete files for the past several years were obtained through the generous cooperation of the Exchange officials. These applications set forth not only the preferred stock provisions but the conditions and purpose of the issue as well. When all other sources failed, recourse was had to direct correspondence with company officials