InvestorsHub Logo
Followers 132
Posts 14317
Boards Moderated 0
Alias Born 02/26/2013

Re: None

Tuesday, 04/19/2016 10:16:41 AM

Tuesday, April 19, 2016 10:16:41 AM

Post# of 298910
Both investors and companies should understand that market price based convertible security deals can affect the company and possibly lower the value of its securities. Here's how these deals tend to work and the risks they pose:

* The company issues convertible securities that allow the holders to convert their securities to common stock at a discount to the market price at the time of conversion. That means that the lower the stock price, the more shares the company must issue on conversion.
* The more shares the company issues on conversion, the greater the dilution to the company's shareholders will be. The company will have more shares outstanding after the conversion, revenues per share will be lower, and individual investors will own proportionally less of the company. While dilution can occur with either fixed or market price based conversion formulas, the risk of potential adverse effects increases with a market price based conversion formula.
* The greater the dilution, the greater the potential that the stock price per share will fall. The more the stock price falls, the greater the number of shares the company may have to issue in future conversions and the harder it might be for the company to obtain other financing.
Before you decide to invest in a company, you should find out what types of financings the company has engaged in - including convertible security deals

PENNY STOCK TRADING IS NOT A TEAM SPORT! TRUST NO ONE! I HAVE NEVER SOLICITED A SINGLE FOLLOW MARK

Join the InvestorsHub Community

Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.