Contingent Shares

AAA

DEFINITION of 'Contingent Shares'

Shares of company stock that are issued only if certain conditions are met. Contingent shares are similar to stock options, warrants and other convertible instruments in that there is a level of uncertainty associated with their issue. For example, for contingent shares to be issued, the corporation must generate earnings that exceed a certain threshold. Contingent shares are also important for common stock holders since the contingent shares can dilute the ownership of existing shareholders.

INVESTOPEDIA EXPLAINS 'Contingent Shares'

In the TARP bailout, the U.S. Treasury was granted contingent shares in certain companies. These shares were meant to offset the risk of loss for taxpayers. Under the terms of the agreement, the contingent shares vest automatically if the U.S. Treasury loses money as a result of purchasing the troubled assets.

RELATED TERMS
  1. Contingent Beneficiary

    1. A beneficiary specified by an insurance contract holder who ...
  2. Full Delivery Shares

    A rating given to the stock of a company traded on the Taiwan ...
  3. Preference Shares

    Company stock with dividends that are paid to shareholders before ...
  4. Contingent Payment Sale

    A type of installment sale in which either the price or payment ...
  5. Contingent Asset

    An asset in which the possibility of an economic benefit depends ...
  6. Common Stock

    A security that represents ownership in a corporation. Holders ...
RELATED FAQS
  1. What are the major laws (acts) regulating financial institutions that were created ...

    Presidents George W. Bush and Barack Obama, in conjunction with Congress, signed into law several major legislative responses ... Read Full Answer >>
  2. Why should investors consider the fully diluted share amount?

    Investors should consider a company's fully diluted share amount before purchasing the company's stock, because it could ... Read Full Answer >>
  3. What's the difference between basic shares and fully diluted shares?

    Basic shares and fully diluted shares are different types of methods to measure the amount of shares investors hold in a ... Read Full Answer >>
  4. What is the difference between share purchase rights and options?

    There is a big difference between share purchase rights and options. With share purchase rights, the holder may or may not ... Read Full Answer >>
  5. Why is a company's diluted EPS always lower than its simple EPS?

    A company's diluted earnings per share is lower than its basic earnings per share because diluted earnings per share takes ... Read Full Answer >>
  6. What is a direct rights offering?

    A direct rights offering is an offer made by a company, directly to existing shareholders, granting them rights to purchase ... Read Full Answer >>
Related Articles
  1. Investing Basics

    The Basics Of Outstanding Shares And The Float

    We go over different types of shares and what investors need to know about them.
  2. Markets

    The 5 Types Of Earnings Per Share

    A look at the five varieties of EPS and what each represents can help an investor determine whether a company is a good value, or not.
  3. Bonds & Fixed Income

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  4. Economics

    How Return On Equity Can Help You Find Profitable Stocks

    It pays to invest in companies that generate profits more efficiently than their rivals. This is where ROE comes in.
  5. Investing Basics

    Understanding Stock Splits

    We explain what they are, the thinking behind them as well as their results.
  6. Investing Basics

    Old Stock Certificates: Lost Treasure Or Wallpaper?

    What if you've discovered some old shares in bearer form? Follow our tips and find out what they're worth.
  7. Bonds & Fixed Income

    Introduction To Convertible Preferred Shares

    These securities offer an answer for investors who want the profit potential of stocks but not the risk.
  8. Investing

    A Breakdown Of Stock Buybacks

    Find out what these company programs achieve and what it means for stockholders.
  9. Options & Futures

    The Two Sides Of Dual-Class Shares

    Find out how dual-class shares can affect a company's performance.
  10. Options & Futures

    The "True" Cost Of Stock Options

    Perhaps the real cost of employee stock options is already accounted for in the expense of buyback programs.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
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!