What are Preference Shares?

What are Preference Shares?

Preference shares were initially a form of ‘temporary rescue' capital used by companies in distress. Today, however, preference share capital is used far more broadly and represents a stable form and source of capital. Prasad explains how preference shares are issued, the different types that exist and how they are priced.
Overview

Preference shares make up a crucial portion of many companies’ capital structure. While the terms of each company’s preference shares may be different, they generally pay a fixed dividend and forego any voting rights. The specific pros, cons, pricing mechanisms and treatment for accounting are all discussed below.

Key learning objectives:

  • Define preference shares

  • Understand the typical rights that come with preference shares

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Expert
Prasad Gollakota

Prasad Gollakota

Prasad has spent 20 years working in financial services, predominantly as a corporate financial advisor. After briefly working at Macquarie Bank and PwC in structured finance & M&A advisory, he joined UBS, where he spent the majority of his career. Prasad's last role was Managing Director before joining Finance Unlocked.

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