Convertible Bonds Effects on Underlying Stock

Convertible Bonds Effects on Underlying Stock



Convertible Bonds Effects on Underlying Stock

Introduction

A convertible bond is one which is convertible into the company's common stock. The conversion option to the bond is exerciseable when and if the investor wants to do it. The conversion ratio varies from bond to bond. The terms of conversion are set forth in the indenture. The exact number of shares or the method of determining how many shares the bond is converted into is printed in the indenture.

Analysis

Many times the indenture will tell you how many shares of stock the ...