You are close to the facts, but missing one key element. What is recorded as cash after an IPO of either preferred or common shares is the par or stated value of the offering, not the actual cash itself. Thus, when a non-cash conversion event transpires, such as when stock is retired, redeemed or even bought back via a share repurchase, it neither is treated as a cash event. It is treated as a capital event. This is why most financial analysts spend more time looking at cash flow statements than the simple balance sheet.
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