A cash plus convertible is a financial instrument that combines the features of cash and a convertible security. It allows the holder to receive a fixed amount of cash, while also having the option to convert the instrument into another security, typically common stock, at a predetermined conversion price. The conversion feature provides the holder with the opportunity to benefit from potential future increases in the value of the underlying security. The terms and conditions of a cash plus convertible are typically outlined in a legal agreement between the issuer and the holder.
A Cash Plus Convertible is a type of investment security that combines a fixed income component with an option to convert the investment into common stock at a later date.
Investors receive regular interest payments on their investment, but also have the option to convert their investment into common stock at a predetermined price.
Investors can benefit from both the fixed income component and the potential for capital appreciation if the stock price increases.
The value of the investment can be affected by changes in interest rates, stock prices, and other market conditions.
The conversion price is typically set at a premium to the current stock price at the time of the investment.
Yes, Cash Plus Convertibles can be bought and sold on the open market like other securities.
No, Cash Plus Convertibles are typically considered to be more suitable for experienced investors who are comfortable with the risks associated with this type of investment.
Interest payments are typically taxed as ordinary income, while any capital gains or losses from the sale of the investment are taxed as capital gains.
Cash Plus Convertibles can be purchased through a broker or financial advisor, or through an online trading platform.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 4th April 2024.
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