Cashless Conversion

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Transaction

    1. An agreement between a buyer and a seller to exchange goods, ...
  2. Preferred Stock

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

    Legal tender or coins that can be used in exchange goods, debt, ...
  4. Warrant

    A derivative security that gives the holder the right to purchase ...
  5. Common Stock

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

    The exchange of a convertible type of asset into another type ...
Related Articles
  1. Introduction To Convertible Preferred ...
    Bonds & Fixed Income

    Introduction To Convertible Preferred ...

  2. Warrants: A High-Return Investment Tool
    Options & Futures

    Warrants: A High-Return Investment Tool

  3. I own some stock warrants. How do I ...
    Options & Futures

    I own some stock warrants. How do I ...

  4. What You Need To Know About Preferred ...
    Trading Strategies

    What You Need To Know About Preferred ...

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center