The conversion rate refers to how many shares a bond can be converted into. The face value of the company's convertible bonds is 1.003 yuan. At the time of conversion, the price of common stock per share is 50 yuan, which is called the conversion price), and the conversion ratio is 20. If the conversion price is 25 yuan per share, the conversion ratio is 40.
The conversion rate is the number of common shares that can be converted into each convertible bond. In a joint-stock company, the holders of convertible bonds or preferred shares have the right to convert their convertible bonds or preferred shares into a certain number of common shares issued by the company within the prescribed time limit. However, this privilege is only valid for a certain period of time. With the passage of time, the conversion rate tends to decrease, even to zero. In order to ensure the stability of the conversion ratio, the holders of convertible bonds and preferred shares need to pay a certain fee to the joint-stock company.
The conversion value of convertible corporate bonds is the value directly converted into stocks, and its calculation formula is: conversion value = current share price × conversion ratio. As can be seen from the above formula, the conversion value is closely related to the current stock price and conversion ratio, and the change of conversion value is only related to the underlying stock price. Therefore, when calculating the conversion value, investors should not only analyze two factors related to the conversion value, but also carefully analyze the stock market. Only in this way can we correctly estimate the value of the converted value.
Convertible bonds are bonds that bondholders can convert into common shares of the company at an agreed price at the time of issuance. If the bondholders are unwilling to convert into shares, they can continue to hold the bonds until the repayment period expires, collect the principal and interest, or sell them in the circulation market for realization. If the holder is optimistic about the appreciation potential of the bond issuing company's shares, he may exercise the right after the grace period and convert the bonds into shares at the agreed conversion price, and the bond issuing company shall not refuse. Bond interest rates are generally lower than those of ordinary companies. Issuing convertible bonds can reduce financing costs. The holder of convertible bonds also has the right to sell the bonds back to the issuer under certain conditions, and the issuer also has the right to redeem the bonds under certain conditions.