Conversion price

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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 ?
The conversion prices are subject to anti-dilution provisions that may reduce the previously mentioned conversion prices in certain restricted circumstances; however in no case shall the conversion price be less than the Market Price reserved for the Private Placement.
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.
77 principal amount and accrued interest relating to its February 2003 secured convertible debentures to an aggregate 4,410,594 common shares of the Company, at conversion prices equal to the previously fixed conversion price of $0.
Based on the respective conversion prices of the Outstanding Debentures, including the estimated interest accrued under such debentures as of the Charter Amendment Filing Date, the Outstanding Debentures are convertible into an aggregate of approximately 20.
Based upon the Conversion Price and estimating the interest accrual on the 2004 Debentures prior to the Charter Amendment Filing Date, the 2004 Debentures with an aggregate principal amount of $14 million would be convertible into approximately 22.
The conversion prices of shares issued in the later tranches will be subject to minimum and maximum prices of $3.
On June 12, 2003 the Company announced that it had reached agreement and implemented a restructuring plan with all of its convertible note holders to waive all outstanding defaults and set fixed note conversion prices.
Effective June 20, 2003, the adjusted conversion prices for the Debentures are:
Mooney Aerospace Group, Ltd (OTCBB:MASGE) announced today that the Company has reached agreement and implemented a restructuring plan with all of its convertible note holders to waive all outstanding defaults and set fixed note conversion prices.
Under the terms of the convertible debentures, the conversion prices were initially fixed at prices ranging from $26 to $29 per share.
NYSE: AMX; Toronto: AXI) today announced that its Alumax Distribution and Industrial Products business unit will increase sheet and coil conversion prices on depot shipments of all alloys (except alloys 5083, 5086 and 5454) by $0.
The conversion rates and conversion prices for these securities will be as follows: