Contingent Shares

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.

BREAKING DOWN '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.

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RELATED FAQS
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  3. What types of future events are taking into account for contingent liability?

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  4. What are the official FASB guidelines regarding contingent liabilities

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  5. How might a company's contingent liabilities affect its share price?

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