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A method companies use to simplify the process of creating new classes of
preferred stock. This is done usually to raise additional funds from sophisticated investors without obtaining separate shareholder approval.
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To do this a company must amend its articles of incorporation
to create a class of unissued shares of preferred stock whose terms and conditions may be expressly determined by the company's board of directors.
This kind of stock can also be created by a public company as a takeover defense in the event of a hostile bid for the company (poison pill). |
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