Convertible preferred stock

(noun)

Convertible preferred stock can be exchanged for a predetermined number of company common stock shares.

Related Terms

Examples of Convertible preferred stock in the following topics:

  • Convertible Stock

    • A convertible security, such as convertible preferred stock, is any security that can be converted into another.
    • Convertible securities can include bonds that pay interest or preferred stocks that pay dividends.
    • Unlike common stock, preferred shares usually have no voting rights.
    • Accounting principles require the reporting of convertible preferred stock in the same manner as non-convertible preferreds.
    • A public company's preferred stock is designated as convertible if it can be exchanged for common stock.

  • Accounting for Preferred Stock

    • When a corporation issues both preferred and common stock, the preferred stock may be:
    • Convertible preferred stock is preferred stock that is convertible into common stock of the issuing corporation.
    • Convertible preferred stock is uncommon, most preferred stock is nonconvertible.
    • Holders of convertible preferred stock shares may exchange them, at their option, for a certain number of shares of common stock of the same corporation.
    • Differentiate between preferred to dividends, noncumulative, cumulative and convertible preferred stock

  • Preferred Stock

    • Preferred stock usually carries no voting rights, but may carry a dividend, have priority over common stock upon liquidation and/or have other benefits.
    • Preferred stock (also called preferred shares, preference shares or simply preferreds) is an equity security with properties of both an equity and a debt instrument , and is generally considered a hybrid instrument.
    • Similar to bonds, preferred stocks are rated by the major credit-rating companies.
    • Details with regards to the rights associated with preferred stock will vary with the business entity that issues the shares, and preferred stock can come in a number of different classes.
    • Some examples are prior preferred stock (highest priority), preference preferred stock, convertible preferred stock (exchangeable for common stock), cumulative preferred stock, exchangeable preferred stock, participating preferred stock, putable preferred stock, monthly income preferred stock, and non-cumulative preferred stock.

  • Provisions of Preferred Stock

    • Preferred shares have numerous rights which can be attached to them, such as cumulative dividends, convertibility, and participation.
    • Preferred stock may be entitled to numerous rights, depending on what is designated by the issuer.
    • Convertible preferred stock can be exchanged for a predetermined number of company common stock shares.
    • Once converted, the common stock cannot be converted back to preferred status.
    • Describe in detail the different types of provisions for preferred stock

  • Common and Preferred Stock

    • Preferred stock generally has preference in receiving dividend payments and always has preference in asset claims during liquidation.
    • In general, there are four different types of preferred stock: cumulative preferred stock, non-cumulative preferred stock, participating preferred stock, and convertible preferred stock.
    • Convertible preferred stock are preferred issues which holders can exchange for a predetermined number of the company's common-stock shares.
    • It is a one-way deal, and an individual cannot convert the common stock back to preferred stock, if they have already exchanged their preferred stock with the company.
    • Participating preferred stockholders can "double dip", and are entitled to both their money back, as well as the leftovers for common stock, proportionate to the amount of common stock for which their preferred stock can be converted into.

  • Overview of Convertible Securities

    • Convertible securities are convertible bonds or preferred stocks that pay regular interest and can be converted into shares of common stock.
    • Convertible securities can be bonds or preferred stocks that pay regular interest and can be converted into shares of common stock (sometimes conditioned on the stock price appreciating to a predetermined level).
    • A convertible bond (CB) is a type of bond that can be converted into shares of common stock in the issuing company or cash of equal value, at an agreed-upon price.
    • Convertible preferred stocks are securities that contain a provision by which the holder may convert the preferred into the common stock of the company (or, sometimes, into the common stock of an affiliated company) under certain conditions - among which may be the specification of a future date when conversion may begin, a certain number of common shares per preferred share or a certain price per share for the common stock.
    • Convertible bonds are safer for the investor than preferred or common shares; they provide asset protection, because the value of the convertible bond will only fall to the value of the bond floor.

  • Preferred Stock Rules and Rights

    • Preferred stock can include rights such as preemption, convertibility, callability, and dividend and liquidation preference.
    • Terms of the preferred stock are stated in a "Certificate of Designation. "
    • Preferred stock is a special class of shares that may have any combination of features not possessed by common stock.
    • The following features are usually associated with preferred stock: Preference in dividends preference in assets, in the event of liquidation, convertibility to common stock, callability, and at the option of the corporation.
    • Preferred stock may also have rights to cumulative dividends.

  • Stocks

    • Stock typically takes the form of shares of either common stock or preferred stock.
    • Convertible preferred stock is preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually any time after a predetermined date.
    • Shares of such stock are called "convertible preferred shares".
    • Preferred stock may be hybrid by having the qualities of bonds of fixed returns and common stock voting rights.
    • They also have preference in the payment of dividends over common stock and also have been given preference at the time of liquidation over common stock.

  • The Cost of Preferred Stock

    • The cost of preferred stock is equal to the preferred dividend divided by the preferred stock price, plus the expected growth rate.
    • The price of a preferred stock is $100.
    • The cost of preferred stock is 13%.
    • Preferred stock may also be callable or convertible, meaning that the company has the option to purchase the shares from shareholders at anytime for any reason - usually for a premium - or convert the shares to common stock.
    • The cost of preferred stock is equal to the preferred dividend divided by the preferred stock price, plus the growth rate.

  • Issuing Stock

    • Owning common stock tends to be riskier than owning preferred stock; yet over time, common shares on average perform better than preferred shares or bonds.
    • The greater amount of risk is due to the fact that shares receive dividends only after preferred shareholders are paid and, in the event of a business liquidation, common stock shareholders are paid last, after creditors and preferred shareholders.
    • Preferred stock is considered a hybrid financial instrument because the shares have properties of both equity and debt.
    • Some other features associated with preferred stock include convertibility to common stock, non-voting rights, and the potential of shares to be either cumulative or non-cumulative of company dividends.
    • Both common and preferred stock issued are reported in the stockholder's equity section of the balance sheet.