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LSDefine
Simple English definitions for legal terms
bond conversion
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A quick definition of bond conversion:
Bond conversion is when a special type of bond can be exchanged for something else, usually stock in a company. This means that the person who owns the bond can choose to turn it into shares of the company instead of keeping the bond. It's like trading one thing for another.
A more thorough explanation:
Bond Conversion
Bond conversion is the process of exchanging a convertible bond for another asset, usually stock.
Example 1: Company A issues a convertible bond to investors. The bond can be converted into shares of Company A's stock at a predetermined price. If the investor decides to convert the bond, they will receive the shares of stock instead of the bond.
Example 2: An investor holds a convertible bond from Company B. The investor decides to convert the bond into shares of Company B's stock because they believe the stock will increase in value.
Bond conversion is a way for investors to potentially benefit from a company's stock price increase. By converting a convertible bond into stock, investors can participate in the company's growth and potentially earn a higher return on their investment. The examples illustrate how bond conversion works in practice, showing how investors can exchange their bonds for stock in the issuing company.