Blank Check Preferred Stock

A way for companies to get around the otherwise-needed shareholder approval when creating a new class of preferred stock. Companies must edit their articles of incorporation to create new, unissued shares of preferred stock.

You may be thinking: why would a company want to go around their shareholders’ backs like that? If someone is trying to take over a public company via a hostile bid, a company may issue blank check preferred stock to try to prevent the takeover from happening. By creating new shares, they can swing voting power, protecting the company from decisions they don’t like. Checkmate.