Angie · learn
Convertible
A bond or preferred share that can be exchanged for common stock. It pays like debt until the equity is worth more, then behaves like equity.
Updated 2026-09-05
A convertible is a bond or preferred share that can be exchanged for a fixed number of common shares. It pays interest like debt while the equity is cheap and converts when the equity becomes worth more than the income stream.
For the issuer it is a way to borrow at a lower coupon by selling the upside. For the buyer it is a bond with an embedded call option. For anyone valuing the company it is a dilution overhang: the share count that matters is the one after conversion, not the one reported today.
See also
- Bond — A loan to a company or government, repaid on a fixed schedule with interest. You are a creditor, not an owner, and you get paid before shareholders.
- Preferred stock — A share with a fixed dividend and priority over common stock, usually without a vote. It behaves more like a bond than like equity.
- Shares outstanding — The share count that converts a whole-company equity value into a per-share figure. Getting it wrong scales every valuation by exactly the same error.
Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.
