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 ?
AS you'd expect, convertible prices are icy flat, and there are some stonking deals at auction at the moment.
Working one period back, the convertible prices are calculated and the points are found where the issuer can call the bond.
Using historical convertible prices, we employ the Marquardt algorithm (Marquardt, 1963) to search for the model parameters that minimize the squared sum of residuals between model-predicted prices and market prices.
(14) This technique allows estimation not just of the parameters of the hazard function but also of the characteristics of the convertible bonds such as volatility and dividend yields that are implied by the convertible prices.
Convertible prices will start at pounds 55,355 for what will become an instant collector's item, with an automatic option lifting the price to pounds 56,705 in 645Ci guise, and in due course other engine options will be added.
Will the shortage of used cars mean that values will stay high - or will the winter weather depress convertible prices? QUENTIN SAYS: Buy in January while the market's seasonally subdued and private sellers are hungry for cash.
BMW 3 Series saloon, coupe, touring and convertible prices will rise by an average of one per cent from May 1, but the recentlylaunched Compact won't change.