Cashless Conversion


DEFINITION of 'Cashless Conversion'

The direct conversion of ownership (from one ownership type to another) of an underlying asset without any initial cash outlay from the investor. Many cashless conversions are automatically triggered on a specific date as specified in the original contract, and will typically affect an entire class of shares or contracts.

BREAKING DOWN 'Cashless Conversion'

Some examples of cashless conversions are from warrants to stock, preferred shares to common shares and stock options to common stock.

In a standard cashless conversion, there is no upfront cost because the transaction will usually be immediately profitable for the investor. If there are any costs involved, they will be paid from the proceeds of the conversion. In the case of warrants, there will often be cashless conversions when the warrant contract runs out if certain breakpoints in the underlying asset or interest rates have been met.

  1. Cash

    Legal tender or coins that can be used to exchange goods, debt ...
  2. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  3. Option

    A financial derivative that represents a contract sold by one ...
  4. Conversion

    The exchange of a convertible type of asset into another type ...
  5. Common Stock

    A security that represents ownership in a corporation. Holders ...
  6. Warrant

    A derivative security that gives the holder the right to purchase ...
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