Convertible Debt
A bond that can be converted into common shares under certain conditions.
Definition
Convertible debt is a financial instrument that combines features of debt (it pays interest and has a maturity) with an option to convert into common shares at a predetermined price. Strategy has issued billions in convertible debt to fund its Bitcoin purchases. For the investor, convertible debt offers downside protection (it earns interest) plus upside participation (it can be converted). For the company, it is a way to raise capital at lower rates than straight debt.
In Context
In 2024, Strategy issued $3,000 million in 0% convertible debt to buy BTC.
Related Terms
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