Right, and in case you didn't notice, he also "owns" a bunch of preferred. Well at least the ESOP does of which he has voting control over. So he sure wouldn't want to do that. Although he is in Indiana and apparently that state is about like Argentina.
Hmm...how about he delists the stock and stops providing financials so you have no idea what's going on and the liquidity disappears? At the same time, he creates an open-ended stock repurchase plan that allows the company to buy back shares on the open market at any time and price of his choosing. Over the years, investors cave in and sell their stock back to the company at heavily discounted prices, increasing Smulyan's ownership percentage.
I'm not saying this will happen, but can you really trust a guy who just went through a long and unprecedented series of events in order to screw other investors in the company?
Yes, that's how the system is supposed to work. In that case, the preferred stock has a priority over the common in liquidation value. If a company could just wipe out its preferred stock whenever it felt like it, no one would ever buy preferred stock, would they?