Replies to post #45541 on Blackout Media Corp (BKMP)

[cowboycadillac]

Death Spiral financing. This type of financing is dangerous. It is usually convertible to common stock at 80% the 3 day average price of the stock on date the financier requests stock. What they do is sell the shares they get immediately, pocket the 20% premium and start the cycle all over again. The way they get the price to continually drop is to short the stock down to a target price, convert, sell and short again. Their shorts are covered by the conversion at the 80% discount. Now their premium can be even higher if they have shorted for over a month and got the price down 40% so when they convert they make more than the 20% reduced premium. They in fact can short the stock into the ground!

[osignal2001]

Note - I'll take a shot.

If with no restriction(s), convertible at any time after disbursement of funds at 70 or 80% of the average market price for typically the last 10 trading days.