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]
- Managerial ownership of voting rights: A study of public corporations with dual classes of common stock – www.sciencedirect.com [PDF]
- The stochastic behavior of common stock variances: Value, leverage and interest rate effects – www.sciencedirect.com [PDF]
- Valuation of callable warrants – link.springer.com [PDF]
- Managerial incentives and corporate investment and financing decisions – onlinelibrary.wiley.com [PDF]
- Analyzing convertible bonds – www.jstor.org [PDF]
- Valuing callable convertible bonds: a reduced approach – www.tandfonline.com [PDF]
- Pricing the Decomposition of Callable and Redeemable Convertible Bonds with Payment of Interest – en.cnki.com.cn [PDF]
- The advantages and disadvantages of financing with preferred and common stock – www.irbis-nbuv.gov.ua [PDF]
