Contingent Convertibles - CoCos


DEFINITION of 'Contingent Convertibles - CoCos'

A security similar to a traditional convertible bond in that there is a strike price (the cost of the stock when the bond converts into stock). What differs is that there is another price, even higher than the strike price, which the company's stock price must reach before an investor has the right to make that conversion (known as the "upside contingency").

BREAKING DOWN 'Contingent Convertibles - CoCos'

Issuing contingent bonds is more advantageous to companies than issuing regular convertibles. Until an investor exercises the option, the company does not need to count shares in its calculation of diluted earnings. (Note: as of July 2004, the FASB's Emerging Issues Task Force proposed an accounting change that, if passed, would eliminate the accounting advantage of CoCos.)

  1. Convertible Preferred Stock

    Preferred stock that includes an option for the holder to convert ...
  2. Convertible Bond

    A bond that can be converted into a predetermined amount of the ...
  3. Mandatory Convertible

    A type of convertible bond that has a required conversion or ...
  4. Common Stock

    A security that represents ownership in a corporation. Holders ...
  5. Conversion Price

    The price per share at which a convertible security, such as ...
  6. Convertibles

    Securities, usually bonds or preferred shares, that can be converted ...
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