Equity-Linked Security - ELKS

It's really a bond, but one that is linked to the equity returns of a given investment.

Example: You have stock in a hot new startup called ButtBook (it's an ode to used cigarettes which turned out to be excellent growth vehicles for tomacco: tobacco-flavored tomatoes). You need cash today. A lot of it. So you create a bond with, say, a set payout of 6%, but one whose eventual payout is undetermined. Maybe it has a par value of $1,000, but that number is pegged to an eventual maturity of 10 years from now, and presumes ButtBook equity is trading then at around $20 a share. However if ButtBook becomes a huge hit, and the shares are at $100, then the eventual principal that you'd own on the debt you pledged...might be zero. That is, the linking of your eventual principal payback, and thus the interest you paid along the way to borrow that $250k up front, is linked to the performance of the equity related to the bond.