Conversion Option
/ˈkɒnvɜːrʒən ˈɒpʃən/
Definitions
- (n.) A contractual provision granting the holder the right to convert one form of security (usually a bond or preferred stock) into another form, typically common stock, under specified conditions.
The investor exercised the conversion option to turn her bonds into shares of common stock.
Forms
- conversion options
Related terms
Commentary
Conversion options are often included in financing agreements to provide flexibility and potential upside for investors; precise terms should clearly define conversion ratios, timing, and triggering events.
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