I apologize, this investment tip will be a little technical. But it highlights a couple of points. I was researching a preferred stock, which had a mandatory redemption, that is, they had to give you your money back on a certain date. Or do they? From their IPO prospectus:
“We are required to redeem all outstanding Series A Term Preferred Stock on April 30, 2024…”
That sounds pretty mandatory. But then later on in the prospectus it says:
“If we are unable to obtain sufficient liquidity prior to the Mandatory Redemption Date, we may be forced to engage in a partial redemption or to delay a required redemption.”
And the definition of sufficient liquidity is up to the management of the company, meaning the redemption could be delayed for a very long time.
Two points I want to make here. First, understand your investments. It’s all fine and good to buy that annuity the nice salesman is pushing, but make sure you really understand what the fine print says, not what he says it means. Second, companies can actually redefine words to mean what they want. Mandatory is a pretty clear word. The term isn’t ‘planned’ or ‘hoped’. Yet in this case mandatory doesn’t really mean mandatory. So be certain you understand exactly what the company is saying, not what it sounds like they are saying when investing your money.