Show PREFERRED STOCK i taking the average run of iii mining ining companies it is not customary for them to issue preferred stock says the denver mining record while two alases of stock may be provided for and even more inore if it were worth while it is only the rare exception when this is done this does not mean that there is any legal objection to preferred stock but that the conditions under which mining companies are usually floated do not seem to require such a device the purpose of preferred stock is usually to give the holder the preference in the distribution of dividends up to a certain amount as well as in the distribution of assets in case of failure but this is hy by no means the only preferred privilege which the stock may carry all stock is in the nature of a contract and the terms of a stock contract so long as they do not conflict with the law may be fixed according to the wishes of the organizers in the case of a prospect company there can be little advantage to a holder of preferred stock while the limitation of the rate of dividend may be a disadvantage for the reason which is generally appreciated that a successful prospect inter enterprise prise is apt to return very large profits upon the investment and all the stock is sure to benefit if there is any preferred stock the holder of it may be limited in his benefits by a fixed dividend clause or a provision which entitles entitle a the company to redeem in the event of failure the preferred stockholder will probably lost just as much as the common stockholder for the failure of a prospect commonly means the of all assets the usual experience is that the stockholder in a prospect company makes a big winning or loses everything the difference in the situation of the preferred and common stockholder being immaterial if we consider the case of an enterprise in which a definite profit is indicated by the ore reserves and money is needed to provide reduction facilities we find a case in which preferred stock may serve a very useful purpose in this instance however the purchaser of preferred stock occupies the attitude of an ordinary creditor the transaction may be interpreted as a loan of money to provide for the reduction of a known quantity of ore the net profit from chich will be sufficient to redeem the preferred stock and pay a handsome rate of interest under such circumstances the position of the common stock is in sharing in the profits of further development which are undetermined and often very uncertain at the time of flotation acting upon this principle that so called treasury stock shall participate in the first profits alone until such time as the investment has been returned though we have offen noticed that such agreements are made without specifically and legally classifying the treasury stock as preferred there is no general rule to determine how corporation stock shall be allotted or in what manner it may be divided into classes the existence of preferred stock to the common stock in a certain proportion is not in itself evidence of good or bad policy the facts concerning the enterprise are the criterion by which to judge |