Callable Common Stock

DEFINITION of 'Callable Common Stock'

A security that represents ownership in a corporation that has voting rights, whose owners are last to be paid if the company liquidates and which is redeemable by the issuing corporation, at a predetermined price or at a premium to the current market price. Typically, callable common stock is issued for a subsidiary company by its parent company. The parent company reserves the right to buy back the shares of the subsidiary company, should it become strategically beneficial.

BREAKING DOWN 'Callable Common Stock'

Common stock is usually non-callable; it must be specifically designated as callable at the time of sale, if the corporation wants to have the option to redeem it. Otherwise, common stock will remain on the market indefinitely, unless the company chooses to buy back its shares on the open market, has its shares delisted or goes bankrupt.

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RELATED FAQS
  1. Why is a premium usually paid on a callable bond?

    Understand the nature and characteristics of callable bonds, and specifically why those factors lead issuers to offer a premium ... Read Answer >>
  2. Why do companies issue callable bonds?

    Learn how callable bonds work, how they include an embedded call option, and understand the additional risks that callable ... Read Answer >>
  3. Under what circumstances might an issuer redeem a callable bond?

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  4. What risk factors should investors consider before purchasing a callable bond?

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  5. Why should a company buy back shares it feels are undervalued instead of redeeming ...

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  6. Why would a company issue preference shares instead of common shares?

    Learn about some reasons that corporations might issue preference shares and why investors might value them more than common ... Read Answer >>
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