Dictionary

convertible note

A short-term corporate bond or a share of preferred stock that can be converted into shares of common stock of the issuing corporation. Convertibles are hybrid securities that combine the potential price appreciation of equity with the income of bonds. Convertible notes are often used as a financing vehicle by startup companies. A convertible note incorporates an equity call option through which the owner can surrender the note in return for equity in a future round of financing.

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