What is the dividend rate and payment structure for the Series AA Preferred Stock?

The Series AA Preferred Stock has a fixed dividend rate of 6.10% per annum. Importantly, these dividends are non-cumulative, meaning if the company does not declare dividends for a particular dividend period, those missed dividends are not accumulated and will not be paid later.

What are the implications of not paying dividends on the Series AA Preferred Stock?

If JPM fails to declare dividends on the Series AA Preferred Stock for the most recently completed dividend period, or fails to pay the liquidation preference plus any accrued dividends (though they are non-cumulative), restrictions will be imposed. These restrictions limit the company's ability to pay dividends or make distributions on its common stock or any other preferred stock that ranks on parity with or junior to the Series AA Preferred Stock.

What is the liquidation preference of the Series AA Preferred Stock?

The Series AA Preferred Stock has a liquidation preference of $10,000 per share. In the event of liquidation, holders of this stock are entitled to receive this amount, plus any declared and unpaid dividends, before any distributions are made to holders of common stock or junior preferred stock.

How does this preferred stock offering affect JPM's financial flexibility?

The issuance of preferred stock represents a form of debt or equity financing. While it provides capital, the fixed dividend requirement (6.10%) adds to the company's fixed expenses. The non-cumulative nature and associated dividend restrictions offer some flexibility, as missed payments do not compound indefinitely, but they still signal financial constraints and can impact the ability to return capital to common shareholders.

JPM 8-K: Shareholder Matters & Corporate Changes

Summary

JPMorgan Chase & Co. (JPM) filed an 8-K on June 4, 2015, to report on the issuance of its 6.10% Non-Cumulative Preferred Stock, Series AA. This filing details the creation and sale of 142,500 shares of this preferred stock, represented by 57,000,000 depositary shares. The Series AA Preferred Stock carries a liquidation preference of $10,000 per share and has specific dividend rights that, if not met, impose restrictions on the company's ability to pay dividends or make distributions on its common stock or other junior preferred stock. The primary purpose of this 8-K is to formally document the establishment of the Series AA Preferred Stock's terms through the filing of its Certificate of Designations with the Delaware Secretary of State. This offering was conducted under an underwriting agreement and was registered with the SEC on Form S-3. Investors should note the non-cumulative nature of the dividends and the potential for dividend restrictions on other securities if Series AA dividends are not paid, which are key considerations for assessing the company's financial flexibility and shareholder returns.

Key Highlights

1JPM issued 142,500 shares of 6.10% Non-Cumulative Preferred Stock, Series AA, with a liquidation preference of $10,000 per share.
2These preferred shares were offered as 57,000,000 depositary shares, each representing 1/400th of a preferred share.
3The filing includes the Certificate of Designations, which legally establishes the rights, preferences, and restrictions of the Series AA Preferred Stock.
4A key feature is the non-cumulative nature of the dividends, meaning missed dividend payments are not accrued.
5The terms of the Series AA Preferred Stock include dividend payment restrictions on common stock and junior preferred stock if dividends on the Series AA Preferred Stock are not declared or paid.
6The issuance was completed on June 4, 2015, pursuant to an underwriting agreement and an effective registration statement on Form S-3.
7The filing serves to officially document the creation and terms of this new class of preferred stock.

JPMORGAN CHASE & CO 8-K Report, Rights Modification (Jun 4, 2015)

Summary

Key Highlights

Frequently Asked Questions