convertible security


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Related to convertible security: Mandatory Convertible

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 ?
Trading decisions are typically based on a comparison of the market value of the convertible security with a mathematically computed expected value relative to the price of the underlying security.
They can surrender the called convertible security to the firm and receive the call price in cash.
The common stock equivalency test has also been described as biased against the classification of a convertible security as a common stock equivalent since it requires comparing the return of a relatively risk-free security (Aa corporate bond) with that of a riskier convertible security.
the first secured Convertible Security with a face value of $2,050,000 will be issued by the Company to Bergen in consideration of a payment of $1,600,000 on execution of the Agreement;
And the convertible security has upside potential, an advantage that no money-market instrument or even most straight bonds can't match.
- Blackham will issue an unsecured convertible security with a face value of AU$175,000 and a term of 36 months at a zero % interest rate.
After calculating incremental EPS for each contingent share group, convertible security and group of options, warrants and equivalents, a company's next step is to rank all potential common shares from the lowest EPS effect (most dilutive) to the highest EPS effect (least dilutive), excluding all potential shares with an incremental per share effect greater than basic EPS for income from continuing operations.
In the context of convertible debenture and convertible preferred issues, investors have obtained provisions that allow the holder to put back the convertible security to the company at par or at a premium in the event of a change of control not approved by the continuing board of directors.
These amounts give effect to the previously announced dividend in the amount of USD0.65 per common share and convertible security, payable on June 15, 2015 to holders of record on June 1, 2015, with an ex-dividend date of May 28, 2015.
This allows that, following the conversion of the convertible security, no more than the greater of 1 million shares or 10% of the trading volume of the shares on the ASX may be sold by SpringTree on the ASX on any given day.
85, Yield Test for Determining whether a Convertible Security Is a Common Stock Equivalent, along with the 102 interpretations of Opinion no.
Other global book-entry securites include: * Convertible money market preferred--Texas Instruments issued, in March of 1987, the first convertible security to come to market in global book-entry form.