medium · Investment Banking implied-share-price
Under the 'If-Converted' method for convertible debt, if the security is found to be out-of-the-money (OTM), how is it treated in the EV bridge?
- It is excluded entirely from the bridge since it is deemed non-dilutive by nature
- It is reclassified as common equity in order to be conservative in the analysis
- It remains classified as debt and no shares are added to the diluted count
- Half of the instrument is treated as debt and the other half as equity
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