Securities that permit the holder to acquire an equity interest by converting (i.e., exchanging) the original security into common stock. Common examples of convertible securities are options, warrants, convertible preferred stock, or convertible debt. Most convertible securities are convertible at the election of the holder. For holders of

convertible preferred stock, the conversion right permits the preferred stockholder to choose between receiving a liquidation preference on the preferred stock and converting the preferred stock to common stock. Conversion only occurs if the value of the common stock obtained on conversion exceeds the liquidation preference.