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conversion price

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Conversion Price
The price per share at which a convertible security, such as corporate bonds or preferred shares, can be converted into common stock.

Notes:
The conversion price is determined when the convertible security is issued and can be found in the bond indenture (in the case of convertible bonds) or in the security prospectus (in the case of convertible preferred shares). The conversion price is essential in determining the number of shares to be received, by computing the quotient of the principal value of the convertible security divided by the conversion price. Usually, the conversion price is set at a significant amount higher than the current price of the common stock, so as to make conversion desirable only if a company's common shares experience a significant increase in value.


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
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.

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? Mentioned in ? References in periodicals archive
 
Tokyo, Japan, Aug 4, 2006 - (JCN Newswire) - Sanix Incorporated (Ticker: 4651, TSE/OSE/FSE, President & CEO: Shin-ichi Munemasa) has notified the revision of the conversion price of First Series of Unsecured Convertible Bonds with Stock Acquisition Rights (Limited Inter-Bond Pari Passu Clause) as follows.
375% Notes became convertible because the closing sale price of Hilton's common stock for at least 20 consecutive trading days during the 30 consecutive trading day period ending on the last trading day of the calendar quarter ended December 31, 2006 was greater than 120% of the conversion price in effect on such last trading day.
Tokyo, Japan, July 7, 2006 - (JCN Newswire) - Sanix Incorporated (TSE: 4651) has announced the following revision of the conversion price of First Series of Unsecured Convertible Bonds with Stock Acquisition Rights (Limited Inter-Bond Pari Passu Clause) as follows:
 
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