What is the redemption and resale of convertible corporate bonds? Please explain its harm and benefits, and tell the actual store, thank you.

Hello, convertible bonds, also referred to as convertible bonds, are the most common mixed financing methods for listed companies in China. They are a kind of mixed securities, a combination of ordinary bonds and securities options. Within a certain period of time, the holders of convertible bonds can convert the bonds into ordinary shares at a predetermined price or conversion ratio, or give up the conversion right and hold them until the bonds are repaid with principal and interest and get a fixed income.

Two basic types of convertible bonds

Indispensable convertible bonds are convertible bonds with inseparable equity and bonds. Bondholders can only complete the conversion between bonds and company stocks within the prescribed time limit according to the denomination of bonds and the agreed conversion price.

Convertible bonds that can be traded separately are convertible bonds that can be separated from warrants and corporate bonds. When they are issued, they are all accompanied by warrants. Corporate bonds and warrants can be circulated and traded independently after they are issued and listed.

Investment and financing value of convertible bonds

For investors, the holders of convertible bonds have the right to buy shares at a certain price in the future. After the convertible bonds enter the conversion period, if the company's share price is high, investors can choose to convert the convertible bonds into the company's shares and get the proceeds from the stock price increase. If the company's share price is low, investors can choose not to convert bonds, get premium income by trading bonds in the secondary market or get fixed income from bond investment when bonds expire. At the same time, the creditor's rights of convertible bonds also ensure that the issuer's creditor's rights take precedence over stocks during liquidation.

For issuers, the interest rate of convertible bonds is lower than that of ordinary bonds under the same conditions, which can effectively reduce the financing cost of the company. If investors choose to convert bonds into ordinary shares during the share conversion period, the company does not need to pay extra fees, which saves costs compared with other equity financing methods. Convertible bonds combine the functions of debt financing and equity financing, which makes issuers more flexible in financing methods, financing nature and financing time.

Main risks of investors and financiers of convertible bonds

For investors, they mainly face systematic risks caused by the economic environment and non-systematic risks such as the issuer's operating conditions and credit risks. In addition, due to the convertibility of convertible bonds, the fluctuation of the underlying company's share price may also cause the fluctuation of bond prices.

For issuers, the main financial pressure they face may be caused by two situations. In the first case, if the company's share price is depressed during the conversion period, the holder does not choose to convert the bond into shares, and the capital pressure caused by the company's debt service when the bond expires; On the other hand, if the convertible bonds have resale clauses and the company's share price is depressed, investors will concentrate on selling the bonds back to the issuer, causing financial pressure.