Adjustment in Conversion Terms


DEFINITION of 'Adjustment in Conversion Terms'

A term used to describe the adjustment made to a convertible securities' conversion factor when the exchangeable stock underlying the convertible undergoes a split.

BREAKING DOWN 'Adjustment in Conversion Terms'

In some convertibles, an adjustment in conversion terms is a scheduled event. Otherwise, these adjustments are made in order to ensure that the holder of the convertible remains unaffected by any related changes.

For example, if a convertible security CBC has an exchange privilege of 1 common for $50, and the common share of CBC splits 2 for 1, then the exchange ratio will be adjusted to 1 common for $25.

  1. Stock Split

    A corporate action in which a company divides its existing shares ...
  2. Convertibles

    Securities, usually bonds or preferred shares, that can be converted ...
  3. Conversion Price

    The price per share at which a convertible security, such as ...
  4. Security

    A financial instrument that represents an ownership position ...
  5. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating ...
  6. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
Related Articles
  1. Retirement

    How IRA Contributions Affect Your Taxes

    Learn how to work with the tax man to avoid getting gouged when you convert your plans.
  2. Bonds & Fixed Income

    Use Duration And Convexity To Measure Bond Risk

    Find out how this measure can help fixed-income investors manage their portfolios.
  3. Personal Finance

    How Risky Is Your Portfolio?

    Find out how you could be subject to larger losses than you think.
  4. Taxes

    Recharacterizing Your IRA Contribution Or Roth Conversion

    Learn why you might make such a transaction and find out how to calculate how it will affect you.
  5. Investing Basics

    4 Reasons a Company Might Suspend Its Dividend

    Learn about the four most common reasons a company may choose to suspends its dividends, including financial trouble, funding growth and unexpected expenses.
  6. Term

    What's Recapitalization?

    Recapitalization is the restructuring of a company’s debt and equity mixture.
  7. Investing Basics

    Explaining Payment-In-Kind

    With respect to financial instruments, PIK means payments made to the holder of a financial instrument that is something other than cash.
  8. Mutual Funds & ETFs

    ETF Analysis: PowerShares Preferred

    Read an in-depth analysis of the PowerShares Preferred ETF, a preferred share-based ETF that focuses on generating investor income.
  9. Markets

    An Expert’s Guide to Market Volatility

    A cursory look at the performance of major U.S. averages reveals a modest correction in stocks with relatively little movement in interest rates.
  10. Investing Basics

    An Example of Dividends in Arrears

    Learn about the concept of dividends in arrears and which shares of stock guarantee payment of accrued dividends even if the company doesn't turn a profit.
  1. Can my spouse and I convert our IRAs to Roth IRAs regardless of earned income?

    You may be eligible to convert your Traditional IRA to a Roth IRA regardless of whether you have earned income. However, ... Read Full Answer >>
  2. I am 59 (not 59.5) and my husband is 65. We have participated in a SIMPLE IRA with ...

    During the first two years after a SIMPLE IRA is established, assets held in the SIMPLE IRA must not be transferred or rolled ... Read Full Answer >>
  3. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  4. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  5. How many votes am I entitled to, if I own ordinary shares of a company?

    If an investor owns one ordinary share of a company, that investor is entitled to one vote on all of that company's major ... Read Full Answer >>
  6. What is the difference between the equity market and the stock market?

    The terms "equity market" and "stock market" are synonymous, both referring to the equity interests in publicly held companies, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!