We’ve got a sense of deja vu here. Back in the early 80’s companies tried to get the NYSE to approve coercive exchange offers of non- or limited-voting stock with a slightly higher return for shares with voting rights. We note that there is already such a security available for anyone who wants to buy it; it is called a bond.

After the SEC blocked the NYSE’s effort to allow coercive exchange offers, the exchange dropped the idea, even after a challenge in court from the Business Roundtable overturned the SEC’s rule. What makes exchange offers coercive is what is called the “collective choice” problem. What makes sense financially for the individual is contrary to the interests of the group. Just another reason to be skeptical about buybacks, this one even more pernicious than the usual short-term bump to stock price. It’s another example of Gresham’s Law: bad securities drive better securities out of the market.

This is a multi-step exchange, via buybacks. But it still reduces voting rights, especially of the “Main Street investors” this SEC claims to prioritize.

Of course they are going after individual investors with this disgraceful transaction as institutional investors would be unlikely to fall for it.

AT&T Inc., T -0.51% which piled on billions in debt to become a media giant, is getting more creative with its pitch to investors.

The company earlier this month issued a new class of shares that guarantee its holders a dividend worth 5% of the share price but no voting rights. The new securities show AT&T, long known as a haven stock for investors in search of safety, aggressively catering to its base.

via AT&T Makes New Pitch to Mom-and-Pop Investors – WSJ