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Convertible Exchangeable Preferred Stock Definition

Definition

The word convertible exchangeable preferred stock describes your security which enables the issuer to swap for convertible bonds. Empirical evidence suggests devoting convertible exchangeable preferred stock is accompanied by an adverse revenue prognosis.

Explanation

Convertible exchangeable preferred stock enables the issuing company to swap a non taxable expense (preferred dividend) to get a resale cost (the interest on bonds). These securities unite two attributes, one which rewards the issuer and also one which rewards the holder:

  • Exchangeability: at the ‘s discretion, preferred stock could be traded for convertible bonds in a predetermined pace.
  • Convertibility: at the holder’s discretionthe trades can be altered in a predetermined speed for shared stock.

While those securities need to be popular with both investors and issuers than preferred stock carrying just among the above mentioned capabilities, their prevalence on the marketplace evolves behind both independently preferred and convertible favorite.