What does stock convertible bond mean?

Stock-to-bond conversion is essentially the conversion of state-owned shares from stock form to bond form. This process aims to reduce the total share capital and increase the circulation ratio while keeping the number of circulating shares unchanged. full circulation. The specific implementation is that listed companies convert state-owned shares into debt, and the debt formed can be repaid in installments. At the same time, it can also be traded in the market by issuing convertible bonds. The proportion of convertible bonds is determined by the company itself.

However, investors need to pay attention to several key points when participating in equity-to-debt swaps. First of all, share conversion may dilute the rights and interests of original shareholders. For example, increasing share capital may lead to a decrease in net assets and earnings per share. Therefore, when a company issues convertible bonds, it will give priority to original shareholders. Secondly, the stock conversion must be operated in accordance with regulations within a specific period, otherwise there may be a risk of forced redemption of the convertible bonds, which may even cause investors to suffer losses when the conversion price is lower than the stock market price. In addition, smart investors will buy convertible bonds with equity potential at reasonable prices during bear markets, because when the market turns into a bull market, the equity characteristics of convertible bonds will significantly increase their value.

In general, stock convertible bonds are a complex financial instrument. Proper understanding and utilization can bring opportunities to investors, but at the same time, relevant rules and market dynamics need to be treated with caution. Understanding these details can help investors make informed choices in their investment decisions.