convertible security

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convertible security

A company issues a convertible security to raise capital for a new project.

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.
convertible security

A company issues a convertible security to raise capital for a new project.

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

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