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Simple English definitions for legal terms
redeemable stock
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A quick definition of redeemable stock:
Redeemable stock is a type of stock that a company can buy back and retire. This means that the company can call in the stock and pay the shareholder the original price they paid for it. Redeemable stock is usually preferred stock, which means that the shareholder has a preferential claim to dividends and assets upon liquidation, but usually has no voting rights.A more thorough explanation:
Redeemable stock is a type of preferred stock that can be bought back by the issuing corporation and retired. This means that the corporation has the option to call in the stock and pay the shareholder the original price of the stock plus any dividends owed.
For example, if a corporation issues redeemable stock at $100 per share and the shareholder has received $10 in dividends, the corporation can buy back the stock for $110 per share.
This type of stock is beneficial for corporations because it gives them flexibility in managing their finances. It also provides shareholders with some security because they know that they can sell their shares back to the corporation at a predetermined price.