convertible preferred stock

Fin
stocks that give the holder the right to exchange them at a fixed price for another security, usually common stock.
EXAMPLE
Preferred stocks and other convertible securities offer investors a hedge: fixed-interest income without sacrificing the chance to participate in a company’s capital appreciation.
     When a company does well, investors can convert their holdings into common stock that is more valuable. When a company is less successful, they can still receive interest and principal payments, and also recover their investment and preserve their capital if a more favorable investment appears.
     Conversion ratios and prices are key facts to know about preferred stocks. This information is found on the indenture statement that accompanies all issues. Occasionally the indenture will state that the conversion ratio will change over time. For example, the conversion price might be $50 for the first five years, $55 for the next five years, and so forth. Stock splits can affect conversion considerations.
     In theory, convertible preference shares (and convertible exchangeable preference shares) are usually perpetual in time. However, issuers tend to force conversion or induce voluntary conversion for convertible preference shares within ten years. Steadily increasing ordinary share dividends is one inducement tactic used. As a result, the conversion feature for preference shares often resembles that of debt securities. Call protection for the investor is usually about three years, and a 30- to 60-day call notice is typical.
     About 50% of convertible equity issues also have a “soft call provision.” If the ordinary share price reaches a specified ratio, the issuer is permitted to force conversion before the end of the normal protection period.

The ultimate business dictionary. 2015.

Look at other dictionaries:

  • convertible preferred stock — Preferred stock that can be converted into the common stock of the issuing company. Like nonconvertible preferred stock, the convertible preferred stock is a class of the corporation s capital stock; has a specified dividend rate that is usually… …   Financial and business terms

  • 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 . Most convertible preferred stock …   Investment dictionary

  • convertible preferred stock — preferred stock that can be exchanged for a fixed number of shares of the common stock of the issuing company at the holder s option. * * * …   Universalium

  • Convertible preferred stock — Preferred stock that can be converted into common stock at the option of the holder. The New York Times Financial Glossary …   Financial and business terms

  • convertible preferred stock — preferred stock that can be exchanged for a fixed number of shares of the common stock of the issuing company at the holder s option …   Useful english dictionary

  • participating convertible preferred stock — preferred stock that can be converted into common stock at the option of the holder. In contrast, to the usual preferred stock, the value of the preferred stock is refunded to the holder. That is, one gets conversion plus the value of the stock.… …   Financial and business terms

  • Convertible exchangeable preferred stock — Convertible preferred stock that may be exchanged, at the issuer s option, into convertible bonds that have the same conversion features as the convertible preferred stock. The New York Times Financial Glossary …   Financial and business terms

  • convertible exchangeable preferred stock — convertible preferred stock that may be exchanged, at the issuer s option, into convertible bonds that have the same conversion features as the convertible preferred stock. Bloomberg Financial Dictionary …   Financial and business terms

  • Preferred stock — Financial markets Public market Exchange Securities Bond market Fixed income Corporate bond Government bond Municipal bond …   Wikipedia

  • Convertible exchangeable preferred stock — привилегированная акция, которая может быть обменена на конвертируемую облигацию с идентичными конверсионными характеристиками. См. также: Привилегированные акции Конвертируемые облигации Финансовый словарь Финам …   Финансовый словарь

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