It stands for profit participation certificate; a certificate that combines specific elements of shares and bonds. It entitles the holder to a profit interest, repayment or loss participation, but no voting rights.
Profit participation certificates are a special type of securities between equity instruments (stocks) and debt instruments (bonds). The PPC holders enjoy certain capital rights, where such instruments are defined by certain essential elements such as profit distribution, risk participation and maturity.
These certificates are issued by firms as a means of raising capital (from external sources) without having to take on new owners as holders of its stocks. The PPC owners, i.e., the participants, are entitled to receive a share in the issuing firm’s profit. This entitlement is limited to net profit, and not to a firm’s assets. The holders do not have any right of ownership over the issuing firm or its stocks.
