Chapter 2 · Types of Securities
Equity securities
Ordinary shares, preference shares, and the instruments that turn into shares later.
Equity means ownership. Every instrument here gives you a claim on what is left after lenders are paid — which is why they can be worth a great deal or nothing at all.
| Instrument | What it gives you | In Nepal |
|---|---|---|
| Ordinary share | Ownership, votes, dividends when declared | The main instrument on NEPSE |
| Preference share | A fixed dividend ahead of ordinary holders, usually no vote | Rare |
| Bonus share | Extra shares from capitalised reserves | Very common |
| Rights issue | The right to buy new shares below market price | Very common, especially among banks |
| Warrant | A long-dated right to buy shares at a set price | Rare |
| Convertible debenture | A bond that can convert into shares | Issued occasionally |
Where each sits in the queue
If a company is wound up: secured lenders first, then unsecured lenders and debenture holders, then preference shareholders, then ordinary shareholders. Ordinary equity is last in every case. That is the price of the unlimited upside.
Convertibles, worked
A debenture of Rs 1,000 converts into 8 shares. The conversion is worth taking when the share price exceeds 1,000 ÷ 8 = Rs 125. Below that you keep the bond and its interest; above it you convert and take the equity.
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