Definition

1. Noun:
   • A corporate security (usually bonds or preferred stock) that can be exchanged for another form of security (usually common stock): A "convertible security" is a type of financial instrument, such as a bond or preferred share, issued by a company. The holder has the right, but not the obligation, to convert it into a predetermined number of the company's common shares at a specified time and under set conditions.

Usage Examples

• Noun:
  • The company issued convertible securities to raise capital, offering investors the potential upside of equity.
  • He decided to convert his convertible security into common stock when the share price exceeded the conversion threshold.

Advanced Usage

• "Convertible security offering": A specific issuance of these instruments to the public or private investors.
  • The startup's latest funding round was a convertible security offering to select venture capital firms.

Variants and Related Words

• Convertible bond (or convertible debenture) (n): A specific type of convertible security that is a bond, paying regular interest, which can be converted into common stock.

  • The convertible bond offered a lower interest rate due to its conversion feature.

• Convertible preferred stock (n): A specific type of convertible security that is a preferred share, often paying dividends, which can be converted into common stock.

  • Holders of the convertible preferred stock will vote on the conversion ratio.

Synonyms

• Hybrid security: A broader term for financial instruments that combine characteristics of debt and equity, which includes convertible securities.
• Convertible: Often used as a shorthand in financial contexts (e.g., "They invested in the company's convertibles").

Related Phrases

• Conversion ratio/price: The terms specifying how many shares of common stock one unit of the convertible security can be exchanged for.

  • The key to valuing the convertible security is understanding its conversion price.

• Forced conversion: A situation where the issuing company can compel holders to convert their securities, typically when the common stock price is high.

  • The call provision allowed for forced conversion if the stock traded above $50 for 30 days.

Noun

1. a corporate security (usually bonds or preferred stock) that can be exchanged for another form of security (usually common stock)