convertible security

(redirected from Convertible Securities)
Also found in: Dictionary, Thesaurus.
Related to Convertible Securities: warrants, Convertible Shares

Convertible security

A security that can be converted into common stock at the option of the securityholder; includes convertible bonds and convertible preferred stock.

Convertible Security

A bond or preferred stock that may be exchanged for common stock in the company issuing the exchangeable security at a certain ratio and/or a certain price. A convertible security gives the holder a great deal of flexibility. It reduces risk by guaranteeing a coupon payment or dividend while also allowing the holder to take advantage of a potentially larger return through the ability to convert the security to common stock. It is less commonly called an exchangeable security. See also: Convertible Option.

convertible security

A security that, at the option of the holder, may be exchanged for another asset, generally a fixed number of shares of common stock. Convertible issues frequently are fixed-income securities such as debentures and preferred stock. Their prices are influenced by changes in interest rates and the values of the assets into which they may be exchanged. Convertible securities vary in price to a greater degree than straight debt but to a lesser degree than the underlying asset. Also called convertible. See also bond conversion, busted convertible, conversion premium, conversion price, conversion ratio, conversion value, mandatory convertible security.
Case Study Convertible securities sometimes sport unusual features that can make these investments difficult to evaluate. In July 2001 Norvellus Systems, a manufacturer of semiconductor production equipment, issued unrated zero-coupon bonds convertible into shares of the firm's common stock at a price of $76.36 per share, a 50%premium to the market price. Zero-coupon debt securities are popular with many borrowers and investors, so the lack of a coupon on the issue was not especially unusual. The unique feature was the issue price of the bonds, which were sold at face value rather than a discount to face value. Virtually all zero-coupon bonds are issued at a discount to par value, thus attracting buyers who are assured of earning a positive return in the event the securities are held to maturity. To attract investors to this unique bond Norvellus agreed to allow bondholders to redeem their securities at par value at the end of one year. In other words, buyers of the securities were guaranteed they would be able to recoup their original investment at the end of a year if they were unhappy with the firm's stock price performance. During the first year Norvellus invested proceeds of the bond issue in U.S. government securities. The government securities collateralized its bonds and allowed the firm to earn interest income at the same time it was not paying interest to bondholders who had purchased the firm's debt. Holders of the convertibles who decided not to redeem the bonds at the end of the first year held a debt security that could be converted into common stock but paid no interest.
References in periodicals archive ?
Today we officially launched our Convertible Securities platform and have begun trading equity-linked securities," said Richard J.
BTIG's Convertible Securities Desk, led by Robert Langer, Head of High Yield and Convertibles Sales and Trading, was launched in October 2009 to complement the firm's equities, fixed income and prime brokerage offerings.
Diluted EPS would be calculated by the "if-converted" method for convertible securities prescribed by Opinion no.
Fidelity Convertible Securities (800-544-3902), while up only 8.
The firm manages assets for several FORTUNE 500 companies, foundations, endowments, public pension plans, insurance companies and two other closed-end funds, the Advent Claymore Convertible Securities and Income Fund (NYSE: AVK) and the Advent/Claymore Enhanced Growth & Income Fund (NYSE: LCM).
Amounts assumed received by a company from the pro forma exercise of options, warrants and convertible securities.
Most convertible securities trade at a premium to their conversion values, due to the incremental value of their fixed-income obligations.
The Company has additional safeguards against dilution in that it can opt not to issue convertible securities to Bergen and to terminate the Agreement at no cost if the price of its shares is lower than a specified floor price.
In the event that the Convertible Securities are fully exercised, the holdings of Pinetree and its joint actors represents a total of 10,330,000 common shares of Goldspike, or approximately 18.
The mandatory convertible securities were sold to the public at 100% of the notional amount of U.
A registration statement relating to the convertible securities has been filed with the Securities and Exchange Commission but has not yet become effective.