Elite Pharmaceuticals Inc (ELTP)

[Sankarad1]

Preferred shares have preference over common shares regarding a few things:

1. Dividend payment. They get their dividend paid before any dividend is paid against common shares.
2. Asset disbursement in case of bankruptcy. These shares will be paid off first before anything is settled against common shares.

Disadvantages of preferred shares

1. They have a fixed value that does not vary with the value of the company. So, if the company appreciates substantially, preferred share holders will realize far less appreciation.
2. Generally the returns over a fixed share is much less than that on a common share.

If the promoters are trying to convert their preferred shares to common shares, it means to say that they are expecting a larger return in the short/medium run. Because, they foresee that the company's value is going to appreciate shortly.