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other chief executives were estimated at 95.2% of
Hollinger’s entire adjusted net income during 1997-2003,
a sum in excess of $400 million.
20 Dual-Class Shares in Practice
Magna International Inc. (CA), has Class B shares
carrying 500 votes for every one Class A share vote.
Magna’s founder and Chairman maintain control over the
company with just 3.4% of the company’s equity!
In the Google (USA) IPO, each of the class-B shares
reserved for insiders would carry 10 votes, while ordinary
class-A shares sold to the public would get just one vote.
USA: Ford Motors, Tyson Foods, Berkshire Hathaway,
Comcast, the New York Times Co.
Canada: Bombardier, Rogers, Shaw, Alliance Atlantis,
Telus Corp., Quebecor, and Onex Corp.
21 Preferred Stock
Preferred stock differs from common stock in that:
– dividends must be paid before dividends on common stock
– iin the event of liquidation, preferred stock is senior to
common stock (but junior to debt)
– iits dividend is fixed at the time of the sale. Unpaid
dividends accumulate. Looks like fixed-income
– sometimes it has a maturity
– iissuing this debt-like security does not affect bond ratings
debt-like Convertible preferred stock can be converted into
common stock by the holder
Adjustable-rate preferred stock has a dividend that is
adjusted quarterly based on changes in short-term
Warrants are long-term call options on the firm’s stock
However, unlike an option, an instrument of the stock
exchange, a warrant is issued by a company.
Warrants are often included as part of a unit offering,
which includes two securities in one package.
Bundling one share and one warrant on the firm’s stock
can serve as staged financing: investors can invest more
by exercising the option if the firm is successful.
Bundling a bond with a warrant gives rise to convertible
23 Private Equity
Private equity is equity that is not registered with the
OSC/SEC and cannot be traded on public markets
Individuals and firms hold private equity in small private
There are also institutions that provide private equity:
Institutions specialized in venture capital provide
financing for new, risky companies
Institutions specialized in restructuring provide financing
for mature firms that make important changes in the way
they do business (e.g., Kohlberg Kravis Roberts & Co.)
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- Spring '13