Convertible bonds: invest in growth
A convertible bond is often used when a company's valuation is uncertain or yet to be determined. Like a traditional bond, it accrues annual interest, but instead of a fixed repayment, it is typically converted into shares at a discount when a predefined conversion event occurs.
Key features of convertible bonds
- Equity instrument: designed to convert into shares rather than remain a fixed-income investment.
- Investor compensation: investors earn interest as compensation for the time their capital is invested.
- Conversion events: may be mandatory (triggered automatically) or optional (investor choice). Check the funding round's KIIS (Key Investment Information Sheet) for further information.
- Principal conversion: only the original principal amount, not compounded interest, is converted into shares upon conversion.
- Repayment at maturity: if no conversion occurs, the principal and accrued interest are repaid to investors.
Successful convertible bonds at Invesdor
Singa is modernizing the last analog bastion of the entertainment industry by building the first truly digital streaming service for karaoke. Since 2015, Singa has expanded into 10 countries and grown to a team of 30.
With the convertible bond, Singa allows investors to benefit from the next capital increase, IPO or company sale at a 20% discount to the share price. Over the term of 34 months, investors receive 10% interest per year.
FAQ: Convertible bonds
Conversion benefits for convertible bonds can be regulated by two conversion mechanisms: reduced share price or predetermined number of shares. The issuer specifies which mechanism applies in the contractual terms of the bond.
-
Reduced share price: the issuer may offer a reduction in the share price to which the bondholder is then entitled upon conversion of the bond (e.g. 25% reduction in the share price at the time of conversion).
-
Pre-determined number of shares: Another mechanism that the issuer may use is to allow the bondholder to receive a pre-determined number of shares for its bond(s) at the time of their conversion (e.g. each bond is converted into 10 shares).
Yes. As the convertible bonds are securities, they are in principle transferable. However, the convertible bonds are currently not tradable on a stock exchange and there is currently no liquid secondary market.
Do you have any further questions?
Get in touch
Contact
Give us a call or send us a message:
Email: service@invesdor.com
Phone: +49 30 364 285 707
Your contact person
Sebastian Kutschker
Senior Customer Success Manager
DE | EN