convertible security

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Related to Convertible Securities: warrants, Convertible Shares

Convertible security

A security that can be converted into common stock at the option of the securityholder; includes convertible bonds and convertible preferred stock.

Convertible Security

A bond or preferred stock that may be exchanged for common stock in the company issuing the exchangeable security at a certain ratio and/or a certain price. A convertible security gives the holder a great deal of flexibility. It reduces risk by guaranteeing a coupon payment or dividend while also allowing the holder to take advantage of a potentially larger return through the ability to convert the security to common stock. It is less commonly called an exchangeable security. See also: Convertible Option.

convertible security

A security that, at the option of the holder, may be exchanged for another asset, generally a fixed number of shares of common stock. Convertible issues frequently are fixed-income securities such as debentures and preferred stock. Their prices are influenced by changes in interest rates and the values of the assets into which they may be exchanged. Convertible securities vary in price to a greater degree than straight debt but to a lesser degree than the underlying asset. Also called convertible. See also bond conversion, busted convertible, conversion premium, conversion price, conversion ratio, conversion value, mandatory convertible security.
Case Study Convertible securities sometimes sport unusual features that can make these investments difficult to evaluate. In July 2001 Norvellus Systems, a manufacturer of semiconductor production equipment, issued unrated zero-coupon bonds convertible into shares of the firm's common stock at a price of $76.36 per share, a 50%premium to the market price. Zero-coupon debt securities are popular with many borrowers and investors, so the lack of a coupon on the issue was not especially unusual. The unique feature was the issue price of the bonds, which were sold at face value rather than a discount to face value. Virtually all zero-coupon bonds are issued at a discount to par value, thus attracting buyers who are assured of earning a positive return in the event the securities are held to maturity. To attract investors to this unique bond Norvellus agreed to allow bondholders to redeem their securities at par value at the end of one year. In other words, buyers of the securities were guaranteed they would be able to recoup their original investment at the end of a year if they were unhappy with the firm's stock price performance. During the first year Norvellus invested proceeds of the bond issue in U.S. government securities. The government securities collateralized its bonds and allowed the firm to earn interest income at the same time it was not paying interest to bondholders who had purchased the firm's debt. Holders of the convertibles who decided not to redeem the bonds at the end of the first year held a debt security that could be converted into common stock but paid no interest.
References in periodicals archive ?
The mandatory convertible securities will be issued at 100 percent of the notional amount and will be mandatorily converted into FCA common shares on December 15, 2016 unless earlier converted at the option of the holder or FCA or upon certain specified events in accordance with their terms.
The Shares and Convertible Securities will be acquired entirely by the parent Bank Alpha Bank A.
The Company has additional safeguards against dilution in that it can opt not to issue convertible securities to Bergen and to terminate the Agreement at no cost if the price of its shares is lower than a specified floor price.
Convertible securities outstanding for the entire period are assumed converted at the beginning of the period.
Kallenberg joins BTIG from KKS Securities, a convertible securities boutique that he co-founded in 2008, which was then bought by Sterne Agee in 2010.
PA) has announced that it has appointed a head for its US Convertible Securities business.
Vanguard Convertible Securities (800-662-2739) has the longest history, averaging more than a 9.
The capital structure of a company with potentially dilutive convertible securities, stock options, warrants or other rights.
Under normal market conditions, the Fund will invest at least 80% of its managed assets in convertible securities and non-convertible income-producing securities, each of U.
These include stock options, warrants, contingent shares and certain convertible securities.
The mandatory convertible securities will be convertible at prices ranging from $48.
As a result of this transaction, Pinetree and its joint actors collectively held, as at October 31, 2014, an aggregate of 3,168,050 common shares of Sphere, including the Common Shares, and rights to acquire an additional 378,750 common shares of Sphere upon exercise of certain convertible securities (the Convertible Securities ).