Definition of ‘Blank Check Preferred Stock’

A method companies use to simplify the process of creating new classes of preferred stock to raise additional funds from sophisticated investors without obtaining separate shareholder approval.

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Investopedia explains ‘Blank Check Preferred Stock’

To do this a company must amend its articles of incorporation to create a class of un-issued 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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