Convertible Preferred Stock

Preferred stock is more attractive to investors if it carries a right to exchange preferred shares for a fixed number of common shares. Convertible preferred stock Preferred stock with an option to exchange it for common stock at a specified rate. gives holders the option to exchange their preferred shares for common shares at a specified rate. When a company prospers and its common stock increases in value, convertible preferred stockholders can share in this success by converting their preferred stock into more valuable common stock.