JPS is not debt They are senior equity with no voting rights. They were a direct infusion of cash for a stated dividend return plus principle and for many years were considered safe enough to be counted as tier 1 capital for U S banks. They are senior to all of the common stock and the governments warrants. For that reason the preferred shares must be paid out or adequately compensated before any action can be taken in regard to common stock. In other words they cannot be diluted by a reverse split and the par value remains intact unless an agreed upon solution is approved by 2/3 of the holders. They trade where they do because there are so few shares in each issue and hedge funds can short the shares ( Margin rules are different for brokerage houses and hedge funds ) or individuals can go short against the box on the shares they own(sell your own shares short with the idea of covering the short at a lower cost). The lower outstanding share count provides wider spreads and more volatility than the common because fewer shares move the market and there really are not that many sellers. At this point in time if the common has a recovery they will face an 80% dilution which would be equivalent to a 5 for 1 reverse split. The preferred has no risk of dilution outside of bankruptcy filing and that is not gong to happen at this stage. Assuming the GSE's stay in business and there is no reason to assume otherwise, the preferred stocks will be worth at least par (and maybe a special dividend to compensate for lost income promised by the government and stolen in the takings action). Could the common be worth more eventually? Yes but if the IPO is used as a valuation starting point, there will be ample time to buy the common if one wishes to do so after the IPO and the preferred values have been realized
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