Reduce EPS By Issuing Preferred Stock
by Pat Stout
Issuing preferred stock would reduce the income available to Apple's (AAPL) common stockholders.
In an SEC filing an Apple investor has suggested that if Apple issued $50 billion of perpetual preferred stock with a 4% yield, it could increase the common stock by $32. Further it suggested that the preferred stock could be distributed at no cost. Every decision has a cost, and the cost to common shareholders if $50 billion in preferred stock were issued would be a reduction of income available to common shareholders by $2 billion or $2.13 per share. Would reducing earnings per share available to common stock add value? If $200 billion in preferred stock was issued at a 4% yield then the reduction in income available to common stockholders would be $8 billion or roughly $8.52 per share. The more preferred issued the less available to common shareholders. read more »
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