jtomm: any company that has majority ownership by insiders can dictate to the minority shareholders to the extent the law allows. One has to put faith in the honesty and fairness of the insiders.
Your hypothetical example is a windfall for shareholders. An exchange of common shares for non convertible, non dividend paying preferred shares ? That's a good deal for shareholders. Isn't that what you wrote ??? Or was the main thrust of what you said that they issued preferred stock redeemable for $200 million in an exchange for $22.5 million worth of common. That would be a fraud and likely illegal. Their common stock would crash instantly if it were allowed.
Why was the capital structure of AEY set up the way it was ? Because the owners wanted it that way. Certainly one could call it greedy to want a $12M claim from the Company, but it's clearly on the balance sheet for anyone with some experience with financial statement analysis to evaluate. Maybe they were afraid the company might go bankrupt and wanted some claim on assets senior to those of common shareholders. It's reasonable in that respect. But most shareholders don't even bother to look at that stuff anyway. I've seen plenty of balance sheets that are far more deceptive than this one. Lots of stuff that's highly relevant gets buried in the footnotes. The recent rule change on the reporting of executive stock options is a good example of expenses once hidden from shareholder view.
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