Convertible notes: debt today, possible shares tomorrow
A convertible note is debt with terms that can allow conversion into equity. Interest, maturity, conversion formulas and settlement choices all matter; the word convertible does not describe one standard deal.
By VolatileShares · Content version 1 · Updated . No live company figures or personalized advice.
Read the actual agreement
Look for principal, interest, maturity, conversion price or formula, conversion conditions and whether cash settlement is possible. Some deals have fixed conversion prices; others have variable terms. Do not use one financing's terms to describe another company.
Ask two different risk questions
Debt can require cash repayment; conversion can increase share count. Inspect liquidity, covenants, security interests and any related warrants. Existing shares, potential conversion shares and authorized shares are different quantities.
A useful trick: test repayment and conversion separately
Keep a repayment case next to a hypothetical conversion case. Link the first to cash runway and the second to dilution. The calculator does not enforce contract triggers, accrued interest or anti-dilution adjustments; verify them before supplying inputs.
A question worth asking
Can I calculate the eventual dilution from the headline principal alone?
Usually not. You need the conversion mechanism, applicable price, timing, settlement terms and any additional instruments. Missing terms should remain unknown.
Sources & method
These explanations use financial-statement concepts and explicitly stated arithmetic. Verify each company's definitions, dates and contractual terms in its original documents. Relative-volume provider definitions are explained in our methodology.
Limitations, update history & corrections
Version 1 introduces this original explainer. Examples deliberately omit company-specific terms and are not a substitute for filings. No human factual-review credential or investment outcome is claimed. Send a correction through the published contact.