A type of equity that comes in the form of preferred shares or convertible bonds that can be exchanged at a future date for common shares at a preset price. Deferred equity gives the holder (of preferred shares/ convertible bonds) the right to buy (convert into) common stock from the issuing company at some point in time. The payouts on deferred equity shares/ bonds are typically lower than normal equity due to the embedded option that allows convertibility into equity that provides better levels of profitability.

Deferred equity also includes warrants, convertible debentures, rights, and issues.