Convertible preference shares give holders an option (right) to convert preference shares into common stock after a set period at a set price. To know more about it, click on the link given below: https://efinancemanagement.com/sources-of-finance/convertible-preference-shares

1. By:-
eFinanceManagement.com
https://efinancemanagement.com/sources-of-finance/convertible-preference-shares
Convertible Preference Shares

2. 1. Meaning
2. Features
3. Conversion Ratio, Price, Premium
4. Advantages & Disadvantages
5. Reference
Content

3. Convertible preference shares give holders an option (right) to convert preference shares into common stock after a set
period at a set price. We can say that they are hybrid instruments having features of both preference shares and common
shares.
Meaning

4. • Do not carry voting rights.
• Do not participate in routine company management decisions.
• Preference shareholders get priority for the dividends.
Features

5. Conversion Ratio:
The number of equity shares that a preference shareholder will get depends on the conversion ratio.
Conversion Price:
It is the price at which converting to common shares gets profitable for the preference shareholder.
Conversion Premium:
The conversion premium is the difference between the value of convertible preference shares and the par value of
common shares.
Conversion Ratio, Price, Premium

6. Advantages:
• Get more dividends.
• The option to convert becomes more valuable if the price of common shares rises.
• Carry less risk than common stock and also get priority over common shares when it comes to claiming on the
company’s assets.
• Good option for companies who want to minimize their cost.
Disadvantages:
• Dividend yield on this class of preference shares is less than other classes of preferred stock.
• Carry the same risk as other common shares after conversion.
• The issue of such shares (after conversion) results in the dilution of control.
Advantages & Disadvantages

7. Reference
To know more about it, click on the link given below:
https://efinancemanagement.com/sources-of-finance/convertible-preference-shares