Convertible Preferred Stock

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What is a 'Convertible Preferred Stock'

A convertible preferred stock is a preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date.

Also known as "convertible preferred shares."

BREAKING DOWN 'Convertible Preferred Stock'

Most convertible preferred stock is exchanged at the request of the shareholder, but sometimes there is a provision that allows the company (or issuer) to force conversion. The value of convertible common stock is ultimately based on the performance (or lack thereof) of the common stock.

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RELATED FAQS
  1. What are the different types of preference shares?

    Learn about the difference between the four types of preference shares – callable, cumulative, convertible and participatory ... Read Answer >>
  2. Why would a company issue preference shares instead of common shares?

    Learn about some reasons that corporations might issue preference shares and why investors might value them more than common ... Read Answer >>
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  4. Where does the stock come from when convertible bonds are converted to stock?

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