Convertible Preferred: Advanced Concepts

What this video covers

• Why the anti-dilution covenant protects the holder of convertible preferred stock, never the issuer, and what corporate actions trigger it
• How the conversion ratio and conversion price move in opposite directions after a stock split or stock dividend
• The correct math shortcut for post-split conversion ratio: pre-split ratio multiplied by the split factor, without long-form division under pressure
• Why conversion value stays constant across a split: more shares at a lower price per share, with total value unchanged
• What a sinking fund provision requires the issuer to do, and how it systematically retires preferred shares over time
• How a sinking fund reduces credit risk and improves price stability while simultaneously increasing call risk on individual shares
• Why a sinking fund on preferred stock behaves identically to a sinking fund on bonds, and how the exam tests that comparison