What is 'Callable Common Stock'

Callable common stock is a share of ownership in a business, redeemable by the issuer, at a predetermined price or premium to the current market price. As with a callable bond, owners of a callable stock are required to sell their shares back to the issuer upon demand. Common stock is not usually callable, unlike preferred shares, which have unique bond-like features, and are more likely, at the issuer's discretion, to be callable.

BREAKING DOWN 'Callable Common Stock'

Common stock 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.

A typical business strategy involving callable common stock is when a parent company issues stock to fund a subsidiary company. By issuing callable stock, the parent company reserves the right to buy back the shares of the subsidiary company, should it become strategically beneficial.

RELATED TERMS
  1. Callable Security

    A callable security is a security with an embedded call provision ...
  2. Money At Call

    Money at call is any financial loan, including a callable bond, ...
  3. Called Away

    Called away is a term for the elimination of a contract before ...
  4. Callable Certificate Of Deposit

    A callable certificate of deposit is an FDIC insured certificate ...
  5. Liquid Yield Option Note (LYON)

    Liquid yield option notes are a synthetic, convertible, callable, ...
  6. Prepayment Risk

    Prepayment risk is the risk associated with the early unscheduled ...
Related Articles
  1. Investing

    Why Companies Issue Bonds

    When companies need to raise money, issuing bonds is one way to do it. A bond functions as a loan between an investor and a corporation.
  2. Investing

    Here's What Happens When a Bond Is Called

    Learn why early redemption occurs and how to avoid potential losses.
  3. Investing

    Preferred Stocks vs Bonds: Which is Best?

    What is the difference between corporate bonds and preferred stocks? Understand the similarities, differences and which to pick for your portfolio.
  4. Investing

    Understanding Preferred Stocks

    Companies choose preferred stock for many reasons some being the flexibility of payments and easier to market. Learn the pros and cons of preferred stocks.
  5. Investing

    3 Bond Picks That Yield 10% or More

    Discover three high-yielding bonds issued by U.S. companies that have noninvestment-grade ratings and yield to maturities that exceed 10%.
  6. Managing Wealth

    What You Need To Know About Preferred Stock

    Curious about preferred shares? Here's what you should know about these bond-like instruments.
  7. Investing

    Simple Math for Fixed-Coupon Corporate Bonds

    A guide to help to understand the simple math behind fixed-coupon corporate bonds.
  8. Investing

    4 basic things to know about bonds

    Learn the basic lingo of bonds to unveil familiar market dynamics and open to the door to becoming a competent bond investor.
RELATED FAQS
  1. What are the different types of preference shares?

    Find out four types of preference shares – callable, cumulative, convertible and participatory - and how each benefits you ... Read Answer >>
  2. Why would a company issue preference shares instead of common shares?

    Learn about some reasons that corporations might issue preference or preferred shares, and why investors might value them ... Read Answer >>
  3. What are the advantages and disadvantages of preference shares?

    Learn about the advantages and disadvantages of preference shares for both investors and issuing companies. Read Answer >>
  4. What is the difference between preferred stock and common stock?

    Preferred stockholders have a greater claim to a company's assets and earnings than common stockholders, but may not have ... Read Answer >>
  5. How do share redemptions and repurchases differ?

    Share repurchases happen when a company purchases shares back from its shareholders. Redemption is when a company requires ... Read Answer >>
  6. What determines bond prices on the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market and why bond prices and yields ... Read Answer >>
Trading Center