Wave Systems Corp. (fka WAVXQ)

[Fullmoon]

4X, wrong or right?

Assuming Wave issues a convertible preferred, we need to see how it is structured.

The "death spiral" preferreds are convertibles that are issued at a perpetual DISCOUNT to the market. Let's assume a 10% discount.... the holders of these pfds will be motivated to short the underlying stock because they know they can cover it 10% lower than where they shorted. SKS is well-aware of this type of pfd and their effect on the stock price.

What if Wave issues a convertible pfd convertible at the market or at a premium? You won't see the selling pressure associated with the death spiral convertibles. In fact, combine that with some sort of coupon and you incent the pfd holders not to convert.