Which factor would deter an investor from investing in a company’s convertible preferred shares?

Convertible preferred shares combine preferred share income features with the option to convert into common shares. Their attractiveness depends heavily on the outlook for the issuer’s common stock because the conversion privilege becomes valuable only if the common shares perform well. If the common stock outlook has been downgraded, the conversion feature becomes less attractive and the investor may be deterred from buying the convertible preferred shares. A long conversion privilege is generally positive because it gives the investor more time for the common shares to appreciate. A high preferred dividend coverage ratio is also favourable because it suggests stronger dividend protection. Therefore, the downgraded common stock outlook is the best deterrent.