Conversion price

Conversion price

Applies mainly to convertible securities. Dollar value at which convertible bonds, debentures, or preferred stock can be converted into common stock, as specified when the convertible is issued.

Conversion Price

In a convertible security, the price at which the owner is allowed to buy an equal number of common shares in exchange for trading in the convertible security. This price is set at the sale of the convertible security. For example, a company may buy an issue of convertible bonds (a low-risk investment) from another company with the agreement that if the company's stock increases greatly in value, the first company may trade its bonds for the right to a certain number of the company's stocks at a set, low price. This price is the conversion price.

conversion price

The price per share at which common stock will be exchanged for a convertible security. The principal amount of a convertible security divided by the conversion price equals the number of shares that will be received upon exchange. The conversion price is usually adjusted downward for events such as stock splits and dividends. See also adjustment in conversion terms.
Case Study On April 2, 2002, GenCorp, an aerospace, defense, chemical, and automotive products manufacturer, announced it had privately sold $125 million principal amount of five-year subordinated notes that were convertible into shares of the firm's common stock. The notes carried a 5.75% coupon and were sold at their $1,000 face amount. The notes had a conversion price of $18.42, meaning each note could be converted into 54.2888 shares of stock. The number of shares per note is determined by dividing the $1,000 par value by the conversion price. The conversion price of $18.42 represented a 27% premium over the common stock that had closed the prior day on the New York Stock Exchange at a price of $14.50. The conversion price is a key element in valuing a convertible security. The lower the conversion price compared to the market price of the stock, the more valuable the conversion feature. A lower conversion price on the GenCorp issue would have allowed the firm to sell the notes with a lower interest coupon. It would also result in additional shares being issued when the notes were eventually submitted for conversion.

Conversion price.

A conversion price is the predetermined price, set at the time of issue, at which you can exchange a convertible bond or other convertible security for common stock.

The number of shares that you'll receive at conversion is calculated by dividing the face value of the security by the conversion price. However, that number changes if the stock has split or has paid dividends.

References in periodicals archive ?
In addition, Vaso Active has agreed to pay to plaintiffs' counsel for the Massachusetts and Delaware derivative actions a total of $25,000 in cash and $110,000 face amount of 2-year 5% subordinated callable notes convertible at a conversion price of $1.
The maximum number of subordinate voting shares that the Company may issue in the aggregate upon conversion of the secured convertible notes and exercise of all warrants and the broker warrant described below is 64,583,731, based on today's exchange rate and conversion price.
The Debentures are convertible into shares of the Company's common stock at an initial conversion price of $3.
In no event will the conversion price on the common shares issued as interest be less than the Market Price reserved for the Private Placement.
Until stockholder approval of certain provisions in the Notes and Warrants is received by the Company, stock issuances may not be made at an effective conversion price below $0.
3571 shares of common stock per $1,000 principal amount of the Notes (which is equal to a conversion price of approximately $28.
The private placement consists of Secured Convertible Discount Notes which were issued at an original issue discount of 5%, are convertible into common stock of the Company at a conversion price of $0.
On and after the new conversion rights date, each $1,000 of senior convertible notes will instead be convertible into shares of common stock at an initial conversion price of $0.
The interest rate, conversion price and other terms of the notes will be determined by negotiations between PolyMedica and the initial purchasers of the notes.
These transactions have the effect of increasing the effective conversion price of the notes, from AmeriCredit's perspective, to $35 (in the case of the 2011 notes) or $40 (in the case of the 2013 notes), which represents approximately a 43% premium (in the case of the 2011 notes) or approximately a 64% premium (in the case of the 2013 notes), in each case to the closing price of AmeriCredit's common stock on September 12, 2006.
The notes will be convertible by the holders at any time following their issuance into shares of common stock of the Company, at an initial conversion price of $25.
The Notes currently are convertible into 111 shares of Common Stock at a conversion price of $9.