Convertible preferred stock,
Definition of Convertible preferred stock:
Convertible preferred stock is used by corporations for fundraising purposes. Companies can raise capital in two ways: debt or equity. Debt must be paid back regardless of the firm's financial situation, but it generally costs less to obtain after tax incentives.
Convertible preferred stocks are preferred shares that include an option for the holder to convert the shares into a fixed number of common shares after a predetermined date. Most convertible preferred stock is exchanged at the request of the shareholder, but sometimes there is a provision that allows the company, or issuer, to force conversion. The value of a convertible preferred stock is ultimately based on the performance of the common stock.
Preferred stock (preference shares) that can be converted into common stock (ordinary shares) at the option of the stockholder (shareholder) or as provided in the agreement under which it was issued.
How to use Convertible preferred stock in a sentence?
- Convertible preferred shares can be converted into common stock at a fixed conversion ratio.
- Once the common share moves above the conversion price, it may be worthwhile for the preferred shareholders to covert and realize an immediate profit.
- After a preferred shareholder converts their shares, they give up their rights as a preferred shareholder (no fixed dividend or higher claim on assets) and become a common shareholder (ability to vote and participate in share price declines and rises).
Meaning of Convertible preferred stock & Convertible preferred stock Definition