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[CheezyTang]

Madmax...preferred vs. common...

Here is the deal.....hope i am knowledgable enough...

Here is a link to the definition:

http://www.streetauthority.com/terms/p/preferredstock.asp

Now, depending on the type of preferred shares being offered, they can be convertable....meaning, at a fixed time and price, the preferred shares can be converted into common shares...In this case, that is what it sounds like, because the raising of the Authorized Shares allows management to offer or convert common into preferred, which reduces the outstanding sharecount, but at a given time, the preferred can be converted back to common. The Authorized Shares allows more preferred shares able to be offered, because of the conversion rate. For instance, if the company converts 50 million common shares into 5 million preferred, the preferred has a set price offered. If the stockprice goes down, more common shares have to be offered to give the preferred shareholder the amount "promised" even if it converts the original 50 million common into 500 million common shares. With the raising of the Authorized Shares, Mr. Plant is able to convert common to preferred without exceeding the company's authorized sharecount, which it cannot do. It must raise the authorized to offer, or sell, preferred shares within a given range.


Did I make sense?

Dan