Series 24: 5.1.3. Convertible Securities

5.1.3. Convertible Securities

Convertible securities are bonds or preferred stock that may be converted into another form, typically common stock. Convertible bonds are bonds that can be converted into shares of preferred or (more often) common stock at a fixed conversion ratio, which is stipulated in the indenture. The convertible feature allows issuers to pay lower yields on debt and to raise equity capital without a public equity offering. It generally allows investors to choose when they want to convert, giving the investor an additional option and thus additional value.

As mentioned previously, convertible preferred stock allows shareholders to participate in the growth of a company. These investors have t