They call them "Death Spiral" and "Toxic" Convertibles for a reason.
From Investopedia:
"The problem with this class of convertible security is that these bonds promote large drops in share price. This is because once a bondholder converts the bond into shares, the influx of these new shares dilutes the share price. Furthermore, bondholders have a large incentive to short sell the common stock prior to conversion, knowing that the share price will fall after the conversion is made. The short sale causes another drop in share price, giving this security its 'death spiral' name."
From the 8K
"The Company specifically acknowledges that its obligation to issue the Conversion Shares upon conversion of the Notes, and the Warrant Shares upon exercise of the Warrants is absolute regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company or parties entitled to receive equity of the Company. Subject to compliance with applicable securities laws, the Subscribers may enter into lawful hedging transactions with third parties, which may in turn engage in short sales of the Securities in the course of hedging the position they assume and the Subscribers may also enter into short positions or other derivative transactions relating to the Securities, or interests in the Securities, and deliver the Securities, or interests in the Securities, to close out their short or other positions or otherwise settle short sales or other transactions, or loan or pledge the Securities, or interests in the Securities, to third parties that in turn may dispose of these Securities."
AI
