If the present course of decisions is continued, it is a serious question whether investors can safely purchase preferred stock at a price above the common stock of the same corporation. In all frankness, such certificates should now bear on their faces a statement that they are subject to alteration in a great variety of ways, all to their detriment, and that if business is bad, losses will be visited upon them, regardless of the liquidation and other preferences which they have on paper. It seems not unlikely that corporations will find that the temporary expedients which they have adopted will make it more difficult to attract that part of the market which prefers security to speculation. The short term solution contains the germs of a long term problem in threatening destruction of the value of preferred stock as an investment.
Arno C. Becht,
ALTERATIONS OF ACCRUED DIVIDENDS: II,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol49/iss4/5