Common Stock Equivalent

Security that can be converted into common stock. It is not now in common stock form but has provisions enabling holders to become common stockholders. A common stock equivalent is included in Primary Earnings Per Share if its effect is dilutive. Examples are stock options, warrants, two-class common stocks, and contingent shares (if related to the passage of time). Contingent shares are shares issuable upon the occurrence of a specified event. A convertible security is a common stock equivalent when its effective yield at the time of issuance is less than 662⁄3% of the average Aa corporate bond yield. See also Earnings Per Share; Fully Diluted Earnings Per Share.