common stock equivalent

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Common stock equivalent

A convertible security that is traded like an equity issue because the optioned common stock is trading above the conversion price.

Common Stock Equivalent

A convertible security that is traded as if it was a common stock. The common stock equivalent is traded like common stock because it can be exchanged for actual common stock on demand from the holder.

common stock equivalent

A security viewed as basically the same as common stock, generally because the equivalent security may be exchanged for shares of common stock. Common stock equivalents include convertible bonds, convertible preferred stock, options, and warrants. Common stock equivalents are used in calculating earnings per share even though the calculation overstates the actual number of shares outstanding.
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The simplification, brought about by eliminating common stock equivalents and the primary EPS calculation, also eliminates a source of arbitrariness.
Thus, if a convertible security is initially classified as a common stock equivalent, it is always a common stock equivalent even though current economic conditions may render its conversion into common stock unlikely.
One of those numbers, primary, EPS, is computed assuming that common stock equivalents, those dilative securities most similar in substance to common stock, were converted to common stock on the first day of the reporting period.
In the example, the convertible preferred shares are common stock equivalents since their effective yield of 5% ($3,500/$70,000) is less than two-thirds of the Aa corporate bond rate (1 0%).
Consensus: The task force concluded the convertible preferred stock would not be considered a common stock equivalent unless the yield on the issue date is less than 66 2/3% of the corporate Aa bond rate.
Broadway said that the common stock equivalents automatically convert at the rate of 1,000 shares of common stock for each share of common stock Equivalents, and the series G preferred automatically convert at the rate of 100 shares of common stock for each share of series G preferred.
The concept of common stock equivalents in the computation of primary earnings per share has been widely criticized as confusing, arbitrary, and misleading.
As part of the recapitalisation the company exchanged common stock equivalents with an aggregate value of approximately USD 11.
Robbins said the difference between basic and primary EPS was that common stock equivalents are not considered in the computation of basic EPS.
accounting rules call for the presentation of primary earnings per share (net income/ common stock + common stock equivalents outstanding) and fully diluted earnings per share.
If it is probable the plan will require the issuance of common stock or common stock equivalents, diluting current equity interests, that should be disclosed as well.