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. Stock Safety: Top 3 Ways to Limit Your ...
    Options & Futures

    Stock Safety: Top 3 Ways to Limit Your ...

Hot Definitions
  1. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  2. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  3. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center