Convertible Security (Noun)
Meaning
A corporate security (usually bonds or preferred stock) that can be exchanged for another form of security (usually common stock).
Classification
Nouns denoting possession and transfer of possession.
Examples
- The company issued a convertible security to attract more investors by offering a potential long-term gain in common stock.
- Investors snapped up the new convertible security because of the promise of potentially higher returns in the form of common stock.
- A convertible security often includes an option for the investor to trade it for a certain number of common stock shares.
- Hedge funds have a fondness for buying convertible securities that they believe are likely to rise significantly in value once they're exchanged for common stock.
- After making their purchase of convertible securities, some shareholders took the next step of immediately exchanging them for the promised shares of common stock.