Buyout - Funds provided to enable operating management to acquire a product line or business, which may be at any stage of development, from either a public or private company. Common Stock - A unit of ownership of a corporation. In the case of a public company, the stock is traded between investors on various exchanges. Owners of common stock are typically entitled to vote on the selection of directors and other important events and in some cases receive dividends on their holdings. Investors who purchase common stock hope that the stock price will increase so that the value of their investment will appreciate.
Common stock offers no performance guarantees.
Additionally, in the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock. Convertible Security - A bond or share of preferred stock that can be converted into common stock at the option of the holder. Thus, the holder has a fixed income security that will not go below a minimum amount because of the interest or dividend payment feature and, at the same time, he or she has a security that is potentially convertible in common stock. Dilution - The process by which an investor's ownership percentage in a company is reduced by the issuance of new securities. The effect on earnings per share and book value per share if all convertible securities were converted and all warrants or stock options were exercised.