Convertible Preferred: Advanced Concepts
Chapters in this video
What this video covers
- What an anti-dilution covenant is, and the critical point that it protects the holder, not the issuer
- How a stock split adjusts the conversion price down and the conversion ratio up proportionally, keeping total conversion value unchanged
- How to calculate the new conversion price and conversion ratio after a 2-for-1 or 3-for-1 split given the original par, price, and ratio
- What a sinking fund provision requires the issuer to do, and why it works the same way on preferred stock as on bonds
- Why a sinking fund reduces credit risk and improves price stability, while reducing liquidity and increasing call risk
- The classic exam trap of confusing who benefits from anti-dilution protection (the customer, not the issuer)
- How to run the anti-dilution math under time pressure for any split factor the exam throws at you
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