Preference shares are not listed because of lack of liquidity & it carries a high risk because minimum application size is Rs10 Lack. Basic difference between preference & common stock are 1. Preference share holders won’t enjoy the voting rights. 2. They get a fixed rate of dividend as pre-decided by company, in case of dividends are not paid then they get voting rights to approve dividends. 3. Preference stock holders can claim over the company assets in case of winding up of a company. 4. Preference shares may be issued with the right of conversion into ordinary shares. 5. Preference shares are redeemed at par value on maturity.
Last year market regulator SEBI has approved for listing of Non-convertible redeemable preference shares. Check these two links given below. Note:- I’m not sure whether this has been implemented.
There are some differences and similarities between ordinary stocks and preferred stocks. Both represent a piece of ownership in a company, and both are tools investors can use to profit from the future successes of the business. The main difference between the two types of stock is that holders of ordinary stock typically have voting privileges, whereas holders of preferred stock do not. However, preferred stockholders receive a fixed dividend from the company, while ordinary shareholders may or may not receive one (depending on the decisions of the board of directors).
Preference Share are not traded on secondary market but they are one of the best primary market instrument for investors.
1. There are not easily available: Usually, preference shares are most commonly issued by companies to institutions. That means, it is out of the reach of the retail investor where as ordinary shares are easily available on secondary market.
2. As mention above preference share holder recieves fixed amount coupon rate decided year on year from the company. there's little scope for the price of these shares to move up or down. Hence these stocks are not so liquid in nature. On the other hand, ordinary or equity shares are traded in the markets and their prices go up and down depending on supply and demand for the stock.
3. But, that does not mean the investor is stuck with his shares. After a fixed period, a preference shareholder can sell his/ her preference shares back to the company or if it is convertable perference shares, they can convert into ordinary shares.
Preference shares are currently listed on exchanges and available for trading on trading platform. These shares are listed under P1 series.
My sister has been asking me what is equity all the time. With this post she will have a clear idea about it. I did try to explain it to her but she didn’t understand. I am glad I found this post as this is a nice information.
trading the shares on the exchange via a broker (with paying all the statutory charges and the brokerage etc)
trading the shares privately with my friends out of the exchange !
what is the difference ?
how can i trade in the preference shares ? in the primary market and in the secondary market …
Preference shares are not traded on stock exchange which means those are not liquid assets and there is very little scope for the price of these shares to move up and down. But equity shares are traded in the market and the prices of those shares fluctuate depending on supply as well as demand for the stock.