What is a convertible preferred stock conversion ratio?

The ratio is set by the company when the convertible preferred stock is issued. Conversion price: The price at which a convertible preferred share can be converted into common shares. Conversion price can be calculated by dividing the convertible preferred stock’s par value by the stipulated conversion ratio.

What is conversion ratio & conversion price?

Conversion ratio: The number of common shares that an investor receives at the time of the conversion of a convertible preferred stock. The ratio is set by the company when the convertible preferred stock is issued. Conversion price: The price at which a convertible preferred share can be converted into common shares.

Can preferred shares be converted to common stock?

Convertible preferred shares can be converted into common stock at a fixed conversion ratio. If the market price of the company's common stock rises above the conversion price, the preferred shareholders can convert those shares to common stock. With the conversion, the shareholder gives up the rights of a preferred shareholder.