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Definition: Blank Check Preferred Stock
Blank Check Preferred Stock is used to raise funds by the companies. It is a class of preference shares where the board of directors decide upon the dividends, voting rights, conversions and other such rights. It is generally issued to overcome a change in the financial need.
Such situations arise when the company is in fear of a hostile takeover or other such. Such situation is called a poison pill where the target company makes her shares unattractive to the acquirer company. But for this, the company has to make changes in the articles of incorporation. Such preferred stock can have conditions like to convert it into a common stock in later stages.
• Costly for the company
• Investors may be disappointed with such issues as they start doubting the company