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.

RELATED TERMS
  1. Deferred Equity

    A type of security, such as preferred shares or convertible bonds, ...
  2. Market Conversion Price

    An investor's effective cost to purchase common stock when it ...
  3. Conversion Value

    The financial worth of the securities obtained by exchanging ...
  4. Convertible Adjustable Preferred ...

    A preferred, floating rate issue, whose interest rate is tied ...
  5. Convertible Debenture

    A type of loan issued by a company that can be converted into ...
  6. Forced Conversion

    The occurrence of an issuer of a convertible security exercising ...
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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 >>
  3. What are preferred shares?

    Understand what preferred shares are. Learn about both the benefits and the drawbacks of preferred shares, which effects ... Read Answer >>
  4. Do convertible bonds have voting rights?

    Convertible bonds usually have no voting rights until they are converted. Even after conversion, they may not be granted ... Read Answer >>
  5. What is common stock and preferred stock?

    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable ... Read Answer >>
  6. What is a 'busted' convertible bond?

    Learn about busted convertible bonds; these are hybrid securities with conversion prices significantly higher than the market ... Read Answer >>
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