Glossary · Reading the business
Conversion rights
In short
These allow holders of certain securities, like preferred stock or debt, to convert them into common stock. They can impact your ownership and the capital structure post-acquisition.
What it means in a deal
If the target company has preferred stock or convertible debt, the holders of these securities may have the right to convert them into common stock. This is a crucial area for due diligence as it affects the true equity base you are acquiring and potential future dilution. Ensure all such rights are identified and addressed in the purchase agreement, either by conversion, repayment, or termination.
Related terms
Common questions about Conversion rights
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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