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Conversion premium

This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.

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May 17, 2017 at 7:39 am #386577
myacca1990
Participant
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“A company will aim to issue bonds with the greatest possible conversion premium as this will mean that for the amount of capital raised it will,on conversion have to issue the lowest no of new ordinary shares”
Well what i don,t understand here is that with the greatest conversion premium the company will have to issue more shares not the lowest no of shares right?
May 17, 2017 at 8:19 am #386603
John Moffat
Keymaster
- Topics: 57
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The higher the conversion premium, the higher will be the current value of the bonds.
Therefore they will need to issue fewer bonds in order to raise the finance they need. If they issue fewer bonds then it will mean fewer shares will need to be issued on conversion.
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