Truth is defined differently, as compared to the religious definition, on Wall Street. Their truth tends to be relative. Our intellectual evolution has led us to give up the swords and six shooters as way to settle individual supremacy and rely more on the battle of wits. This happens to play out almost perfectly on the investment scene as nearly everyone is interested in accumulating wealth, even the churches and the temples need cash to pay bills. And in this pursuit of wealth playing a game of hide and seek with information has become the norm. Ones controlling information try to hide it as long as they can while those wanting to get a little edge seek and never find all. Add lawyers and the Internet into this mix which makes definition of the rules to battle wits a mine field of legalese and transmission of such information instant. Now you can see why there is such a proliferation of investment advisors and professionals as individuals give up the market and find it safer to get paid 0.25% in bank accounts. Last winter’s performance has made it quite vivid that chances are, you could lose a lot of money if uninformed.
Among the investment instruments that clearly illustrate this battle between wise and unsuspecting, preferred shares are close to the top. There are others like asset backed commercial papers (ABCP of yore) and swaps but many of these are thankfully, still fairly uncommon. Most prefs come with some sort of a clause like retraction, redemption, maturity, reset, conversion and many more. Not knowing what features adorn your piece of paper can be very unhealthy for your portfolio.
Great-West Lifeco Inc. redeemed all of its outstanding Series E first preferred shares on Dec. 31, 2009. The redemption price was $26 for each Series E first preferred share plus an amount equal to all declared and unpaid dividends, less any tax required to be deducted and withheld by the corporation. The paid-up capital of the Series E first preferred shares is $22.78 per share.
A formal notice and instructions for the redemption of the Series E first preferred shares will be sent to shareholders in accordance with the rights, privileges, restrictions and conditions attached to the Series E first preferred shares.
This is the first warning shot and you should pay heed. Many pref’s will be called as the years go by and you may face significant capital losses if you end up buying them now and get called later.
