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.

  1. Callable Preferred Stock

    A type of preferred stock in which the issuer has the right to ...
  2. Callable Security

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  3. Noncallable

    A noncallable security is a financial security that cannot be ...
  4. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer ...

    Shares are a unit of ownership of a company that may be purchased ...
  6. Share Purchase Rights

    A type of security that gives the holder the option, but not ...
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  1. Under what circumstances might an issuer redeem a callable bond?

    Understand why an interest rate drop usually compels bond issuers to redeem callable bonds and re-issue them at the new, ... Read Answer >>
  2. What risk factors should investors consider before purchasing a callable bond?

    Understand the difference between callable and non-callable bonds and consider all the various risk factors associated with ... Read Answer >>
  3. What are the accounting entries when a company issues a callable bond?

    Learn how callable bonds are treated on balance sheets, and understand why callable bonds often pay investors a premium for ... Read Answer >>
  4. Why would a company choose to repurchase in lieu of redeem?

    Learn the difference between a stock repurchase and a stock redemption, and find out about the reasons why a company might ... Read Answer >>
  5. Why should a company buy back shares it feels are undervalued instead of redeeming ...

    Discover the difference between common stock and preferred stock. When is repurchase preferable to redemption, and what factors ... Read Answer >>
  6. Can anyone own common stock in a company?

    Understand who can purchase common stock as well as the key characteristics that differentiate common stock from preferred ... Read Answer >>
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