because you have to pay for good people. The new team wants to grow the company exponentially and want to be rewarded for doing so. If they can turn this company into a 2 bil mkt cap ($40) their dilution will have been worth it.
Preferred stock is like a bond or promissory note. If they default on the repayment, then you are given shares. If all goes well they redeem the preferred shares. My understanding is there is no dilution unless they would default on the repayment. I have high hopes for S&W but $40 would be what? A 1200% increase? I won't turn it down if it happens.