Listen to a Business English Dialogue About Conversion price
Elena: Hi Paul, do you know what a conversion price is?
Paul: Hi Elena, yes, it’s the price at which a convertible security, such as a convertible bond or preferred stock, can be converted into common stock.
Elena: That’s correct. It’s usually stated in the terms of the convertible security and determines the number of shares an investor will receive upon conversion.
Paul: Right. A lower conversion price means investors can convert their securities into more shares, potentially benefiting if the stock price rises.
Elena: Exactly. It’s an important factor for investors to consider when evaluating the potential returns and risks associated with convertible securities.
Paul: Yes, because if the market price of the common stock exceeds the conversion price, investors can convert their securities and profit from the difference.
Elena: That’s true. However, if the conversion price is higher than the current market price, the convertible security may not be as attractive for conversion.
Paul: Right. In that case, investors may choose to hold onto their convertible securities until the market price of the common stock increases.
Elena: Yes, and understanding the conversion price helps investors make informed decisions about when to convert their securities or whether to hold onto them.
Paul: Absolutely. It’s an essential concept for investors to grasp when considering investments in convertible securities.
Elena: Definitely. By understanding the conversion price, investors can better assess the potential benefits and drawbacks of investing in convertible securities.