springing convertible

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Springing Convertible

A convertible security that may be exchanged for common stock in the issuing company and, in addition, contains warrants allowing the holder to purchase more shares if he/she desires. Under certain defined circumstances, the exercise price for these warrants drops dramatically. Springing convertibles are issued in an antitakeover measure. Common circumstances under which the exercise price drops include hostile tender offers and other hostile takeover attempts.

springing convertible

A convertible security that includes warrants to purchase additional shares of the issuer's common stock. Certain prescribed events, such as a hostile tender offer or the accumulation of a large block of stock by a single group, cause the exercise price of the warrants to drop or spring. This unusual security is issued primarily to deter a corporate takeover by making the takeover more expensive.