First, creditor's rights. Credit is the basic attribute of convertible bonds.
Second, equity. After the convertible bonds are converted into shares, the original creditors become shareholders of the company and enjoy shareholder rights such as dividends.
Third, transferability. The significance of convertible bonds lies in giving creditors flexible options to convert shares, and whether to convert shares is entirely up to creditors, making convertible bonds an investment product with both offensive and defensive functions.
Fourth, the right to choose. Convertible bonds are financial derivatives based on corporate bonds with conditional options.
The basic elements of convertible bonds mainly include coupon rate, issuance scale, duration and conversion period, underlying stock, conversion price, conversion price amendment clause, resale clause and redemption clause. The last four items are mainly introduced here:
First, the conversion price. The conversion price is the payment price of convertible bonds converted into stocks, and it is the "exercise price" of the call option part of convertible bonds. During the existence of convertible bonds, the price will be adjusted with the changes of related factors. When the conversion price is lower than the stock market price, it is equivalent to buying stocks at a low price, and the price of convertible bonds will rise. When the conversion price is higher than the stock market price, it is equivalent to buying stocks at a high price, and the conversion price will fall, and some even fall below the face value 100 yuan.
Second, the conversion price amendment clause. The amendment clauses are divided into active amendment and passive amendment. Active correction refers to the issuer's necessary adjustment to the conversion price of convertible bonds to protect the interests of bondholders after the issuance of convertible bonds, which leads to changes in the number of shares and a decline in the stock price due to rights issue, rights issue, additional issuance, merger and division. Passive amendment clause, that is, "special downward amendment clause", generally means that if the stock price is lower than the conversion price in a certain period of time, then the listed company has the right to lower the conversion price under certain conditions.
Third, the resale clause. The resale clause means that if the share price of convertible bonds falls sharply after issuance, and when the share price is much lower than the conversion price and reaches certain conditions, investors can resell the convertible bonds to the issuer in the form of bond face value plus interest compensation according to prior agreement. The main purpose of the resale clause is to protect the interests of investors, ensure the safety of investors' principal to a certain extent, and reduce the investment risk of convertible bonds. Investors can focus on the resale period and resale price.
Fourth, the redemption clause. Redemption clause refers to the clause that the issuer of convertible bonds redeems the unconverted bonds held by investors according to the agreement under certain conditions, with the main purpose of protecting the interests of the issuer. Simply put, when the market price of the stock far exceeds the agreed conversion price, the issuer has the right to redeem the convertible bonds at the agreed price. From the perspective of investors, this clause is the upper limit of the price of convertible bonds. Investors should pay attention to the time node of this clause to avoid losses caused by failure to convert into shares on time.
In addition, before trading, investors should also pay attention to 1 convertible bonds with a face value of 100 yuan, and 10 convertible bonds bought through bidding transactions or their integer multiples are declared. When selling convertible bonds, the part with the balance less than 10 shall be declared for sale at one time. If the number of single transactions is not less than 5,000 or the transaction amount is not less than 500,000 yuan, block transactions can be adopted. Different from stock trading, convertible bonds are traded on the same day, that is, T+0 trading, which can be bought and sold on the same day. There is no limit to the rise and fall of convertible bonds, and transaction fees generally only charge trading commissions and do not charge stamp duty.
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