Preference Equity Redemption Cumulative ...



Preference Equity Redemption Cumulative Stock (PER

Stock and PERCS or PERQ Comparison
A limited term, limited participation convertible preferred stock with an enhanced dividend. PERCS shares are convertible at maturity into one share of the underlying common stock if the common stock is selling below the PERCS strike price and into a fractional share equal in value to the PERCS strike value if the common is selling above the strike. After three years, the PERCS shares are converted to common automatically on these terms, and the dividend drops back to the regular common stock dividend. PERCS were the most successful financial product of 1991, because they provided a relatively high current yield in a declining yield environment. As the illustration indicates, the PERCS is essentially a covered call structure. Synthetic PERCS have been issued by third party issuers, largely investment banks. Also called Mandatory Conversion Premium Dividend Preferred Stocks (MCPDPS), Participating Equity Preferred Stock (PEPS), Preferred Income Participation Security (PIPS), Equity Redeemable Bond, Common-linked Higher Income Participation Security (CHIPS), Equity Yield Enhancement Security (EYES), Short-Term Equity Participation Units (STEP Units). See Short-Term Appreciation and Investment Return Trust (STAIR), Yield Enhanced Stock (YES), and many other names. See also Americus Trust.

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