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A unit consisting of common stock and a put giving the buyer of the unit the right to put the stock back to the issuing corporation. In addition, the put feature usually gives the holder the right to obtain more shares at no additional cost if the market price of the shares falls below a stated level, as of a predetermined date or dates. This combination of provisions provides a floor value for each unit holder's position. If the market value of the stock rises above the stated floor value on the valuation date(s), the put has no value. If the market value of the position falls below the floor, the issuer is obligated to issue additional common shares or repurchase the stock. Variations on this basic structure include limitations on the number of shares to be issued, restrictions on the ability of the issuing corporation to make the unit purchaser whole through the issuance of additional shares or by cash payments, or by debt or preferred stock issuance. Puttable stock units enable investors to participate fully in the upside potential of a company with reduced downside risk. Although the structures are very different, the payoff pattern of a puttable stock issue is very similar to that of a convertible bond.
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