Correct. When a company issue shares to pay the toxic financiers, to convert a note into shares, those shares immediately become part of the O/S.
What you do not understand is that after that, the financiers need to sell those shares, to turn them into cash, so they get their money. This is what is happening now. They are selling these shares into the market, so now these shares are becoming part of the called Free Float.
If they hold those shares, and, do not sell them, how they make their money?
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