konvertibeli

Konvertibeli is a term used in several languages to describe a financial instrument that can be converted into another security, typically equity, under predefined terms. The most common form is the convertible bond (or convertible note), issued by a corporation or government entity to raise capital while providing the investor an option to convert the debt into a specified number of shares of the issuer’s stock at a predetermined conversion price or ratio, during a defined conversion window or at maturity. Convertible preferred stock is another form that combines features of debt and equity and can be converted into common shares.

Key terms and mechanics

- Conversion price and conversion ratio: the price per share and the number of shares issued upon conversion. The conversion value is often compared with the market value of the shares at the time of conversion.

- Maturity and coupons: traditional convertible bonds accrue interest and have a fixed maturity date; some structures allow conversion before or at maturity.

- Optionality and calls: investors may convert at their discretion within allowed periods; issuers may have call provisions to force conversion or redeem the instrument under certain conditions.

- Dilution and protections: conversion can dilute existing shareholders; agreements may include anti-dilution provisions or adjustments to the conversion price.

Valuation and trade-offs

- For investors: potential upside exposure to the issuer’s equity if the stock price rises, with downside limited to the bond’s value if it cannot be redeemed or converted advantageously.

- For issuers: cheaper financing relative to straight debt due to lower coupons and the option to convert, at the cost of potential equity dilution if many bonds are converted.

Regulation and accounting

- Convertible instruments are governed by securities laws and are typically classified as debt until conversion, with specific accounting treatment under IFRS or GAAP.

Konvertibeli is commonly used in corporate finance and startup financing, offering a bridge between debt and equity with built-in optionality.

---