Overhang

Overhang refers to the potential dilution or downward pressure on a stock’s price due to a large amount of convertible securities, options, or warrants that could be exercised. Overhang is a key concern for investors because the conversion of these securities can flood the market with new shares, affecting stock performance. It is particularly relevant in private equity when companies issue options or warrants as part of their financing strategies.

• Potential dilution from convertible securities.
• Can place downward pressure on stock prices.
• Relevant in private equity and companies issuing options or warrants.
• Key concern for investors monitoring stock performance.