We use cookies to improve security, personalize the user experience, enhance our marketing activities (including cooperating with our marketing partners) and for other business use.
Click "here" to read our Cookie Policy. By clicking "Accept" you agree to the use of cookies. Read less
Convertible preferred stock refers to a type of stock that can be converted into a predetermined number of common shares at the shareholder's discretion. It combines features of both debt and equity financing.
Convertible preferred stock provides investors with a fixed dividend payment and priority in receiving assets during liquidation. Additionally, it grants the option to convert these shares into common stock, which allows investors to potentially benefit from the company's growth.
Companies issue convertible preferred stock to raise capital while providing investors with attractive features, such as regular dividends and potential equity upside. It allows businesses to access financing that has a lower interest rate than traditional debt instruments.
Investors holding convertible preferred stock have the advantage of receiving a fixed dividend payout, which provides a stable income stream. Moreover, they have the option to convert their shares into common stock, allowing them to participate in the company's success.
Convertible preferred stock can sometimes be redeemed by the issuing company. This means that the company has the right to buy back the shares from investors at a predetermined price, usually after a specific date.
Convertible preferred stock and common stock differ primarily in terms of shareholder rights. Preferred stockholders typically have a higher claim on assets and earnings, while common stockholders have voting rights and the potential for higher returns.
Purchase Agreement Form Template Trusted and secure by over 3 million people of the world’s leading companies