Convertible Preferred Stock

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DEFINITION of 'Convertible Preferred Stock'

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."

INVESTOPEDIA EXPLAINS '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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