Updated on March 7, 2023
An exchangeable security is a financial asset or instrument which can be traded or exchanged in future for shares and in some cases, for cash, as per the terms and conditions set during issuance. The financial asset is usually a debt security. A key feature of an exchangeable security is that it grants its holder the right to trade it for shares of the common stock of a company other than the issuer of the exchangeable security. Exchangeable security is generally used by a company which is planning a takeover. The sale proceeds from exchangeable securities will help in financing the takeover or acquisition and the investors will be repaid in shares of the acquired company.