24 THE WORK OF THE STOCK EXCHANGE
company’s bonds have been repaid, preferred stockholders have
the next call, and common stockholders must take what remains
after preferred stockholders have been satisfied.
There is in practice too wide a variety in the terms accord-
ing to which preferred stocks are issued, to make generaliza-
tions concerning them altogether easy. Some American com-
panies issue “first” and “second” preferred stock issues, at the
same or at different dividend rates. Many preferred stocks
are in their indentures accorded features ordinarily associated
with bonds, such as convertibility into common stock, or retira-
bility at a price. Usually but not always preferred stocks in
America have no vote. Some preferred issues acquire the vote
in case their own dividends, or the common stock dividends
are passed, or in case the ratio of company net earnings to the
amount of the preferred dividend falls below a certain point.
The truth is that preferred stock in America as abroad is
really an intermediate form of security, partaking of the nature
of bonds as well as common shares, and in all cases the careful
investor in preferred stock should thoroughly study the exact
provisions attending each particular security issue. Theoreti-
cally, a preferred stock entails less risk, and is attended by
greater stability in market price, than a common stock. Prac-
tically, however, there are many exceptions to this rule.
The Chief Forms of Securities.—A feature of securities
frequently overlooked, yet highly important in its effect on
Stock Exchange operations, is the form in which they are
issued.” Essentially, there are three chief forms for securities:
(1) “inscribed”; (2) “registered”; and (3) “bearer.”
Inscribed securities are mainly peculiar to Great Britain,
and are practically unknown in the United States. No security
certificates at all are issued for them, and evidence of owner-
ship depends directly and solely upon the entry of the owner’s
name in the register of the issuing company or government.
Transfer of such issues thus consists, not in the delivery of
® Appendix If.
