Convertible bond

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Convertible bond

General debt obligation of a corporation that can be exchanged for a set number of common shares of the issuing corporation at a prestated conversion price.

Convertible Bond

A bond that a bondholder may exchange, at a certain price, for common stock in the company issuing the bond. The number of shares one receives for each bond and the price one pays for those shares are determined when the convertible bond is issued. A convertible bond is a low-risk investment, but it affords the investor a great amount of leeway because he/she can exchange it for another security with higher risk and a higher return. Certain convertible bonds may only be exchanged at certain points in their lives. The extent to which bondholders exchange convertible bonds is sometimes seen as an indication of whether the share price is overvalued or undervalued. See also: Busted convertible, Overhanging bond, Convertible preferred stock.

Convertible bond.

Convertible bonds are corporate bonds that give you the alternative of converting their value into common stock of that company or redeeming them for cash when they mature.

The details governing the conversion, such as the number of shares of stock you would receive, are set when the bonds are issued.

A convertible bond has a double appeal for investors. Its market value goes up if the stock price rises, but falls only to what it would be as a conventional bond if the stock price falls. In other words, the upside potential is considered greater than the downside risk.

While convertible bonds typically provide lower yields than conventional bonds from the same issuer, they may provide higher yields than the underlying stock.

You can buy convertibles through a broker or choose a mutual fund that invests in them.

References in periodicals archive ?
We also find that the market reaction to convertible debt security offers is influenced by investors' expectations regarding the anticipated security choice decision and the perceived motive for issue.
In the example above, assuming the corporation had sufficient earnings and profits, the convertible debt holder would be deemed to have received dividend income of $5,032.
Eliminating nearly $1 million dollars in convertible debt is a monumental and strategic achievement for the company as it vastly improves the capital structure of BioCorRx as the potential dilutive effect of the debt is removed.
Berjaya Philippines also acquired 81.25 million units of Redtone's convertible debt valued at about P211.18 million, accounting for 33.46 percent of total convertible debt.
Finally, the final regulations contain a rule providing that the holder of a call option, warrant, convertible debt, or convertible equity issued by a partnership (or an entity eligible to elect to be treated as a partnership under Regs.
A common assumption underlying these theoretical and empirical studies is that investor demand for convertible debt is perfectly elastic at a price that reflects the fundamental value of future cash flow.
The dispute was over the $250 million deposit Global placed with NBQ as part of a deal to acquire a convertible debt instrument in NBQ.
Net income rose to USD21.3m or USD0.58 per diluted share for the third quarter of 2010 compared to USD3.3m or USD0.09 per diluted share in the same quarter of last year, the diluted share count for the third quarter of 2010 includes 2.5m shares fro the USD25m of convertible debt at the company which decreases earnings per share by USD0.04.
The raised proceeds will be used for general corporate purposes and for refinancing convertible debt.
The company has reported that during the first half of 2009, the company has reduced convertible debt by over USD150m, or around 37%.
Auto Business News-4 November 2008-Tesla secures approval for USD40m in convertible debt financing(C)2008 ENPublishing - http://www.enpublishing.co.uk
Proceeds will be used to refinance 4% notes due in August and fund redemptions on convertible debt due in 2023.