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Wednesday, August 13, 2014 4:41:50 PM
In my experience, the company issues a note and in return gets cash. The note will carry an interest rate. Whatever date principle and interest are due, the note is converted into stock. The conversion price is usually at a steep discount (30-50%) applied to the lowest closing price in the 10 days leading up to the due date.
These shares are not part of the OS until they are converted on the due date. These shares are not restricted.
One thing I have learned recently is that the lender can require the company to keep AS as reserved shares, but those shares do not show up in the OS.
The question for you all is, how many more of these convertibles are going to be coming due? Durations are usually 6-12 months, from what I've been dealing with.
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