# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Blank Check Preferred Stock

Written By
Paul Tracy
Updated November 4, 2020

What is a Blank Check Preferred Stock?

Blank check preferred stock refers to the issuance of a class of preferred shares where the board of directors has authority determining voting rights, dividends, and conversion without separate shareholder approval.

How Does a Blank Check Preferred Stock Work?

The most common reason a company will issue blank check preferred stock is to create a "poison pill" whereby the rights associated with the stock make a takeover unattractive.

In order to issue this type of stock, a company will normally have to amend its articles of incorporation Then the board of directors will issue the shares, using its power over the voting, conversion, dividends, and other rights to create a share class that meets its needs.

For example, the board of Company XYZ may issue a blank check preferred stock that can be converted to common shares if a working capital is proposed, creating a higher expense for the company to be bought.

Why Does a Blank Check Preferred Stock Matter?

Blank check preferred stock can act as a safety mechanism from unwanted takeovers. As well, companies can use the blank check preferred stock to quickly raise capital without awaiting shareholder approval. However, given the powers that must be entrusted to the board of directors in order to issue the shares, investors should carefully monitor when and for what reason blank check preferred shares are issued.

Ask an Expert about Blank Check Preferred Stock
At InvestingAnswers, all of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Blank Check Preferred Stock.
Be the first to ask a question

If you have a question about Blank Check Preferred Stock, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

If you have a question about Blank Check Preferred Stock, then please ask Paul.

Ask a question Read more from Paul

Read this next

Paul Tracy - profile
Ask an Expert about Blank Check Preferred Stock

By submitting this form you agree with our Privacy Policy

Share
close
Don't Know a Financial Term?
Search our library of 4,000+ terms