Contingent Convertibles - CoCos

A A A

DEFINITION

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").

INVESTOPEDIA EXPLAINS

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.)


RELATED TERMS
  1. Busted Convertible Security

    A convertible security that is trading well below its conversion value. The ...
  2. Structured Yield Product Exchangeable ...

    A type of convertible bond issued by companies that pays a quarterly cash coupon ...
  3. Irredeemable Convertible Unsecured ...

    A type of security that can be used to purchase underlying common shares. It ...
  4. Common Stock

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

    The price per share at which a convertible security, such as corporate bonds ...
  6. Convertible Bond

    A bond that can be converted into a predetermined amount of the company's equity ...
  7. Convertible Preferred Stock

    Preferred stock that includes an option for the holder to convert the preferred ...
  8. Convertibles

    Securities, usually bonds or preferred shares, that can be converted into common ...
  9. Mandatory Convertible

    A type of convertible bond that has a required conversion or redemption feature. ...
  10. Diluted Earnings Per Share - Diluted ...

    A performance metric used to gauge the quality of a company's earnings per share ...
Related Articles
  1. Introduction To Convertible Preferred ...
    Bonds & Fixed Income

    Introduction To Convertible Preferred ...

  2. Convertible Bonds: An Introduction
    Bonds & Fixed Income

    Convertible Bonds: An Introduction

  3. Free On Board
    Professionals

    Free On Board

  4. An Introduction To The CMA Designation
    Professionals

    An Introduction To The CMA Designation

  5. Has Stock Bias Affected Your ETF Asset ...
    Bonds & Fixed Income

    Has Stock Bias Affected Your ETF Asset ...

  6. Top 4 Most Competitive Financial Careers
    Professionals

    Top 4 Most Competitive Financial Careers

  7. Operating Profit
    Investing

    Operating Profit

  8. Buying bonds at a premium? Note these ...
    Bonds & Fixed Income

    Buying bonds at a premium? Note these ...

  9. Current Assets
    Investing Basics

    Current Assets

  10. Is Ukrainian Debt Worth a Look?
    Bonds & Fixed Income

    Is Ukrainian Debt Worth a Look?

comments powered by Disqus
Hot Definitions
  1. Cash and Carry Transaction

    A type of transaction in the futures market in which the cash or spot price of a commodity is below the futures contract price. Cash and carry transactions are considered arbitrage transactions.
  2. Amplitude

    The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
  3. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  4. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  5. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  6. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
Trading Center