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Convertible Adjustable Preferred Stock (CAPS) Definition

Definition

The word non flexible preferred stock describes an increased rate security using an rate of interest that’s glued to Treasury securities. Convertible adjustable preferred stock might be altered by the holder to the dividend payment .

Explanation

Also called funding market preferred stock (CMPS), semi flexible preferred stock (CAPS) provides investors with a floating rate that’s usually synced to a Treasury security. The holder of the stocks has got the option to convert the CAPS to average stock in the dividend payment .

The range of common stocks received is equal to the level value of their favorite. This mechanism offers the investor having a preservation of funding feature in case the credit history of the issuer was supposed to decline. Issuers will typically put a cap to the amount of shares received upon conversion. This protects your issuer out of a big change in control at case the purchase price of the issuer’s average stock falls to remarkably low rates.