# How does a company redeem its preferred stock?

This question follows from: What does it mean for a company to redeem its preferred stock?

If I own a preferred stock and the issuer chooses to exercise its right to call, how does the redemption take place?

Am I contacted by the company and/or the brokerage house to perform a "sell" transaction?

Or will these shares automatically "vanish" from my account and be replaced by cash (redemption price times the number of shares)?

Or something else?

Once a preferred stock has been called, it may trade close (usually a bit lower) to par (the redemption price) for a good amount of time before the call date. If so, it may make sense to sell the stock early, taking a small haircut so that the cash can be put to better use. If a Pfd stock is being redeemed at $25 a month from now, I'd take$24.95 now instead of having dead money for a month.
For example, JPM-B announced on 2/01/19 that the issue was being called on 3/01/19 for $25. It was sellable on 2/01/19 for$24.97
• Yes, one would have to factor a commission into the decision - for me it's an inconsequential factor. For those paying the typically higher $6.95 per trade it's still meaningless if you own perhaps 500 or 1,000 shares. Take my JPM-B example. 1,000 shares sellable one month early at$24.97 and a $6.95 commission. That's$24,963.05 . Would you wait 30 days to earn $36.95? 2% interest exceeds that. I'd rather have my money 'working' for me. Another 6% preferred would earn$125 in the same time frame. Even more if you go up the rate scale. It's a no brainer :->) – Bob Baerker May 2 at 11:05