Convertible securities will increase number of shares outstanding if converted?
It seems like it is a must that the company will issue new shares when its convertible securities holders decide to convert (like, we don’t apply treasury stock method for these convertible securities when calculating diluted EPS whereas we do with stock options). And it is stated that, in the case of convertible preference shares, the company usually wants to prevent the decrease in share price by offering to buy back the converted shares.
So, I want to ask, why don’t they just buy shares from the market to redeem those convertible securities? Or is it true that it is not necessary that the company will issue new shares?
Study together. Pass together.
Join the world's largest online community of CFA, CAIA and FRM candidates.