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What does it mean when an investor moves a bond to equity?

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What does it mean when an investor moves a bond to equity?
posted Sep 8, 2017 by Vijay

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That's not a technical term I'm familiar with, to "move" a bond to equity, and frankly it could be interpreted more than one way, so I'll describe what I think would be most likely.

For one, that phrase might be referring to a convertible bond that can be converted into stock. An investor buys a convertible bond because the owner wants the ability to convert it from a debt instrument, the bond (as in the issuer is paying you interest because by buying the bond you are lending the issuer your money), into an equity instrument, stock (ownership of which gives you a fractional share in the ownership of the issuing company). The operative term here is to "convert" the bond to stock, however, not "move".

Secondly, it might be used to mean to reallocate assets from debt to equity (bonds to stock). This is a bit inaccurate because you have to sell a bond (or bond fund) and use the proceeds of the sale to then buy a stock (or stock fund), you can't simply "move" a bond to equity.

There may be other possibilities, but if I was a betting man (although I'm not), I'd think it was one of the two I've described.

answer Sep 11, 2017 by Ati Kumar
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