A convertible is a loan to a limited company that the lender can later choose to exchange (convert) into shares, at a set price. It is a way to raise capital that resembles a stock option program.
When a convertible is converted into shares, new shares are issued, which increases the share capital and can cause dilution for existing owners. The event must be recorded in the share ledger and affects the cap table.
Conversion of convertibles means a convertible debt instrument is exchanged for new shares in the company.
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The conversion price is the price per share at which a convertible can be exchanged for new shares.
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A stock option program gives, for example, employees the right to buy shares in the future.
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Dilution means existing owners' stake in the company decreases when new shares are issued.
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