Convertible preferred shares provide the option to convert into what type of shares?

Convertible preferred shares provide the option to convert into common shares. This feature allows shareholders to benefit from any potential appreciation in the value of the company's common stock, giving them an opportunity to participate in the equity growth of the company after initially investing in a fixed-income instrument.

The convertible feature typically attracts investors who wish to have the safety and dividend benefits of preferred shares while also retaining the ability to benefit from any significant upside that the company's common shares may offer if the company performs well. This duality makes convertible preferred shares unique, as they blend characteristics of both equity and debt securities.

In contrast, bonds and debentures are forms of debt financing that do not offer equity ownership options, while options refer to derivatives that give the holder the right, but not the obligation, to buy or sell a security at a predetermined price. Thus, the structure of convertible preferred shares specifically allows conversion into common shares, which is a fundamental feature of this type of equity security.