A preferred stock that allows the holder to convert into common stock. It gives the holder a preference in the event of a company liquidation or sale. The conversion feature enables the holder to exchange the convertible preferred shares for common stock at his discretion at a conversion rate specified in the stock certificate. Typically, conversion provisions help protect the stockholder from the full dilutive effects of a possible future sale of by the issuing company at reduced prices. An antidilution provision, for example, entitles the holder to receive additional shares of common stock upon conversion if the company sells stock at prices below purchase price.