What Does Convertible Preferred Stock Mean? Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares".
Investopedia explains Convertible Preferred Stock
Most convertible preferred stock is exchanged at the request of the shareholder, but sometimes there is a provision that allows the company (or issuer) to force conversion. The value of convertible common stock is ultimately based on the performance (or lack thereof) of the common stock.
So it only stands to reason that someone believes that these 425,000 shares of common stock are worth a heck of alot more than the current pps and perhaps more than the $4,216,000 value of the perferred stock. Why else would one come to such an agreement?
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