Definition
The privilege granted to preferred shareholders to convert their fancy preferred stock into common stock, typically exercised when they want to sell or when common stock becomes more valuable (rare but delightful). It's a one-way ticket that investors usually only take when they're confident they're not leaving money on the table.
Example Usage
Before the IPO, all our preferred shareholders exercised their conversion rights to common stock at a 1:1 ratio.
Origin
Standard corporate securities law terminology dating to early convertible securities
Fun Fact
Conversion rights typically convert automatically upon an IPO, whether investors want to or not, democratizing the cap table for public markets.
Related Terms
Translate This Term
See “conversion rights” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.
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