Actually, a note holder can convert the note all at once, but you will NEVER see them do that for a couple of different reasons:
1). If they convert a note and the shares total more than 9.9% of the shares outstanding they are considered a control person and will have filing and selling restrictions placed on their ability to sell those shares.
Even holdings of 5% to 9.9% require 13G filings and most note holders aren't interested in disclosing or filing anything more than what they absolutely have to.
Because of this, conversions are usually set at 4.99% of the shares outstanding or below. This also limits their risk which is the second reason why they always convert in pieces or "tranches".
2). Once a note holder converts a portion of the note, they now have a set cost basis on those shares. Obviously the objective is to sell above the cost basis. By doing it in small tranches, this limits their exposure and hedges their ability to guarantee profits by continuously taking small pieces of the note and liquidating them into the market since the discount is always set at a discount to the average bid price of the date that the conversion notice was sent in.
If the bid holds up that's great because at a 50% haircut (discount) to market that will give a 100% ROI. But if the bid doesn't hold up they have a lot of cushion. Also, if the bid falls, this means they will receive more shares for the same discount on the next conversion.
This is why Asher Group is known as the "kiss of death" to investors. They purposely beat up companies in order to extract as many shares possible on their conversions in order to increase their ROI.
In my personal experience I would say the average hedge fund (note holder) gets an 80% to 100% ROI while Ashers aggressive trading model nets them a 300% ROI on average.
NOT BAD FOR A SIX MONTH LOAN!