Lookback period
A lookback period is the window of recent trading days a financing agreement looks back over to set a conversion or purchase price, such as the lowest VWAP in the prior ten trading days.
Last verifiedHow it works
Many market-priced financings do not use a single day's price. Instead they define a window, for example "the five trading days immediately preceding the conversion date", and take a statistic from it: the average VWAP, the lowest VWAP, the lowest closing price, or the lowest intraday trade. That window is the lookback period.
Equity lines use short pricing periods (often one to three days) to set each purchase price. Variable-price conversions on notes or preferred stock commonly use longer windows of ten to twenty trading days.
Why the length and statistic matter
The combination of a long window and a "lowest price" statistic lets the conversion price reflect the cheapest moment in the window, even if the stock has recovered since. A short window or an average statistic tracks the current price more closely.
Worked example
Hypothetical: Company X's closing prices over ten trading days ran from $1.50 down to $1.10 and back up to $1.45 today. A note converts at 80% of the lowest closing price in the lookback period.
| Lookback | Lowest close | Conversion price |
|---|---|---|
| 3 days | $1.38 | $1.104 |
| 10 days | $1.10 | $0.88 |
All figures are hypothetical.
With the ten-day window, the holder converts at $0.88 while the stock trades at $1.45, a 39% gap, compared with a 24% gap under the three-day window.
How to spot it
In the note or certificate of designation, find the defined terms "Conversion Price", "Measurement Period" or "Trading Day", and read which statistic is used ("lowest", "average", "closing", "VWAP"). Pair it with the VWAP discount to understand the full formula. See Toxic convertibles.
Guides that use this term
- Toxic Convertible Notes: How Variable Pricing WorksToxic convertible notes explained: how variable conversion prices, VWAP discounts and lookback windows work, and what happens to share counts with no floor.
- Prepaid Advance Agreements: How They Become SharesHow a prepaid advance agreement works: cash up front repaid in discounted shares, and how the discount, lookback, floor and triggers set the share count.
Related terms
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Definition from the Signal8 Academy glossary. Educational content only. DilutionScan and Signal8 are not broker-dealers or investment advisers, and nothing here is a recommendation to buy or sell any security.