What Are Preferred Red🥃eemable Increased Dividend Equity Securities (PRIDES)?

Preferred Redeemable Increased Dividend Equity Securities, or PRIDES, are synthetic securities consisting of a 澳洲幸运5官方开奖结果体彩网:forward contract to purchase the issuer's underlying security and an interest-bearing deposit for a specific price. Interest payments are made at regular intervals, and conversion into the underlying security is mandatory at maturity. PꦫRIDES were first introduced by Merrill Lynch & Co.

Understanding Preferre🤪d Redeemable Increased Dividend Equity Security (PRI๊DES)

PRIDES are similar to 澳洲幸运5官方开奖结果体彩网:mandatory convertible securities but have a different structure. They are similar in that the preferred share must be converted into 澳洲幸运5官方开奖结果体彩网:common stock by a certain date. A publicly traded company issues convertible securities when it needs to raise capital by issuing stock, but doin💦g so would potentially put a strain on the price of current shares.

PRIDES allow investors to ear﷽n stable cash flows while still participating in the capital gains of an underlying stock. This is possible because these products are valued along the🌠 same lines as the underlying security. 

Though there ar🗹e differences i🗹n mandatory convertibles and their underlying structures, there are common features of which PRIDES also share:

1. The mandatory conversion to equity once the convertible matures.
2. An appreciation cap or limit, as opposed to common stock.
3. The dividend yield is typically higher than that of common stock. Additionally, many mandatory convertible securities have tax advantages.

PRIDES are considered a preferred sꦚtock because they have priority over common stock and carry rights beyond those of common stock. For example, owners of preferred shares may have an advantage should a company file bankruptcy or liquidate.

Preferred stocks can be issued by a company of any size, and they have characteristics of both equity and debt. Holౠders of PRIDES do not have voting rights, whereas holders of common stock generally vote on many issues. However, holders of PRIDES often receive a considerably higher dividend than common shareholders, which is a significant advantage.