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W,

I don't think it is as straight forward as you suggest. When the dividends are not paid on the hybrids they are not cumulative so they are lost and really they accrue to the benefit of the ordinary shareholders. One way of looking at it is that in hard times such as these, we have the use of your money for nothing. I have been a shareholder in a company called CMI where a bloke called Ray Catelan got control of the ordinary voting shares and simply cancelled the hybrid dividend even though the company was very strongly cash flow positive. In fact worse than that, the board recently announced that it was unlikely to pay the hybrid dividend for the next three years even though the company has no debt and made a profit of $13.3m in 2010/11. The CMI hybrid share price has collapsed in recent years and on two occasions now the board has tried to buy them back at a fraction of the original issue price. Sad to say, but Ray died a few months ago and the shares have gone up 50 percent since his death. Shareholders at that company have been fighting a war with the board for years now and the outcome is still in abeyance.

Just to quote another example, Paperlinx ordinary shares have had that good recovery over the last three weeks or so yet the PXUPA hybrids haven't moved and remain close to their lows. The PXUPA shareholders have been told that they are not getting their next dividend.

If there is a turnaround at Elders, I am confident that the ordinary shares will increase much more sharply than the hybrids. After all, they have fallen much more sharply on the way down.

If the company did eventually go into receivership I suspect we would both be in trouble. Your stock is safer but I am of the view that the potential rewards and particularly the short term ones are much greater in the ordinary shares.

GPASAS