Conversion Rights

These are rights by which preferred stock "converts" into common stock. Usually, a person or an entity is entitled to this right at any given time after making an investment. For instance, a company may demand the rights to force a conversion upon an IPO, either upon hitting certain sales or earning targets or upon a majority/supermajority vote of the preferred stock. On some occasions, though, conversion rights may carry with them anti-dilution protections as buffer against potential decrease in investment value.

Previous: Co-investment Next: Convertible Security