The downside of Merrill's capital injection

Sovereign wealth that comes with no board seat or managerial voice seems like a great way to boost an ailing bank's capital. There are some downsides, however. Speaking of Merrill Lynch, Fortune notes three. (1) All those convertible preferred shares are expensive. At 9 percent, they make it much more likely that dividends to common shareholders will be cut--and stay cut. (2) Dilution is a real concern. When all those convertibles convert to common shares in three or so years, earnings will be pressured. And (3) the "lost voice" that these shares carry. Top execs will appreciate that these sovereign wealth investors will not be agitating for board seats and such. But these investors could be a great voice for change should the need arise. So while the new capital is a great short-term fix, they are not without costs. It's lamentable that these companies ended up in these positions.  

For more:
- here's the Fortune item