What does Cashless Conversion mean?
A direct conversion of one ownership type to another of an underlying asset without the investor having to put out initial cash.
The transfer of underlying assets from one person to another person without any cash outlay from the investors is called cashless conversion. Such transactions are well defined at the time of writing such contracts. These contracts automatically trigger the transfer of assets on specific date or in case of any event.
Futures Knowledge Explains Cashless Conversion
Classic examples of such contracts are conversion of preference shares to stocks or convertible debentures to common stocks. In case of convertible debentures are converted to stocks as per the contract, it can be in the event of non-payment of interest or in the event of at the time of maturity.