Define: Security Price
Security Price is the value assigned to a security, typically the average closing or bid price over a defined measurement period, used in a contract to calculate payments, conversion ratios, valuations, or settlement amounts. Parties reference an exchange or authorized pricing agent to ensure the figure is objective, verifiable, and not subject to unilateral manipulation by either side.
Legal accuracy standard set & glossary spot-checked by Imad Mohammed Nazar , Skadden-trained M&A lawyer, Legal Engineer at GenieAI
What Security Price Means in a Contract
Security Price refers to a defined monetary value attributed to a financial instrument, such as a share, bond, or option, for purposes specified within a contract. Rather than leaving the price to be argued over at the moment of performance, parties agree in advance on a method for calculating it, often by referencing an average of closing or bid prices over a set window of trading days. This approach reduces disputes because both sides know exactly how the number will be derived and can independently verify it.
In practice, Security Price acts as a mechanical input that feeds into other contractual obligations. It might determine how many shares are issued upon conversion of a note, how a payout is calculated under an earn-out, or how collateral is valued under a financing arrangement. Because so much can hinge on this single figure, contracts typically spell out the exact source, timeframe, and calculation methodology rather than relying on vague language like.
Relevant Circumstances
- Buying, selling or trading securities
- Establishing financial services contracts
- Setting the conditions for an investment agreement