Conference 7.286::digital

    See your broker.
    
    Typically, individuals do NOT want to own preferred stock (convertible
    may be an exception, but ours is not convertible).
    
    Institutions receive a tax advantage on preferred stock that does not
    apply to individuals -- I do not know the specifics, only the
    statement.
    
    You probably own preferred stock through mutual funds, etc.
    
    That is all the info I have, other than I was told this categorically
    (right or wrong) several years ago.

    Re .1
    
    Maybe I missed it, but I don't see anything in your note that indicates
    why someone wouldn't want preferred stock. In fact, from my little
    understanding of preferred stock (which may be wrong), the main
    difference between preferred and common stock is that holders of the
    former get their money before the holders of the latter (but still
    after bond holders) if the company goes under.
    
    	BD�

    Re .2:
    
    In general, suppose there are two things A and B which are similar in
    availability, return, and risk, except that B has tax advantages to
    some group.  Then that group will be willing to pay more for B, so its
    price will go up.  To people who do not get the tax advantage, there is
    no point in paying the higher price for B, so they should prefer A over
    B.
    
    This explains why individuals would not want preferred stock if there
    is a tax advantage for corporations to own them.  However, I haven't
    seen any explanation of such advantage.
    
    
    				-- edp
    
    
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    Of course you're right, edp, given those assumptions. It seems,
    however, that the evidence invalidates the assumptions. If my
    understanding is correct (again, a big IF), then the expected return of
    the preferred stock is greater than that of the common stock. Also,
    this morning's stock prices showed that the preferred stock was selling
    *lower* than the common ($23 versus $29).
    
    	BD�

>   the expected return of
>    the preferred stock is greater than that of the common stock. 
    
    If you believe this (and it may be true) then you should seriously
    consider staying away from BOTH stocks.  Common Stock is riskier and,
    therefore, should have a greater expected return.
    
    >Also,
>    this morning's stock prices showed that the preferred stock was selling
>    *lower* than the common ($23 versus $29).
    
    And, even more incredibly, this morning's newspaper showed a huge
    disparity between the sunrise time and the price of common (6:01 AM vs 
    $29).
    
    But seriously - 
    
    Every investment book I have ever read has explained the difference
    between common stock vs preferred stock, and has clearly pointed out
    that common is the way to go for the vast majority of people.  I would
    like to point out that the term "Preferred Stock" is vastly misleading,
    as people tend to interpret it as "Preferred" stock.
    
    It is vastly more complicated than this, and if interested you should
    really investigate it so you know WHY you should prefer "Preferred",
    but to me:
    
    "Preferred Stock" = almost a corporate bond.
    "Common Stock"    = stock preferred by most investors.
    
    As always, shoot to kill...
    
    Wayne
    
    
    

    re .4
    >Also, this morning's stock prices showed that the preferred stock
    >was selling *lower* than the common ($23 vs. $29)
    
    They are not related.  The preferred stock was offered at $25.
    (In effect, those buyers have already watched their 8.75% dividend for
    the entire year get pissed away, and that's assuming Digital is able/
    willing to pay it out later.)  kb

    When DIGITAL offers a Cumulative Preferred Stock, then that may be more
    attractive to the "man-in-the-street."
    
    				Malcolm.

    Dividend income to CORPORATIONS from preferred stock of other
    corporations is NOT taxable.  Dividend income to INDIVIDUALS from
    preferred stock IS taxable.  As a result, corporations are willing
    to pay more for preferred stock than individuals, so most preferred
    stock is owned by other corporations.  This doesn't mean you, as
    an individual shouldn't consider owning preferred stock, just that
    you should compare the taxable dividend income from that stock to
    other potential investments when making your decision.
    
    David

	I suggest that NYOSS1::DIGITAL_INVESTING would be a more appropriate
	place for a more in-depth discussion of this topic.

	Roy

re: .0

> through the ESOP ? 

Nit - I think the only program we have left is the ESPP, not the ESOP.
The Ownership plan, which granted free stock to employees at no cost,
was a temporary thing that went away. The Purchase plan remains.

If I'm wrong, please correct me.

-Jack

    Yes,ESOP went away about six years ago when Congress took away the
    "benny" of corporations getting a "tax CREDIT" on stock *given* to
    employees. Only ESPP remains.
    
    Ken