400m short is not bad news for the company, it's bad news for investors. The debt conversion investors will pay debt and acquire the needed shares to cover any shorts but for much less than what they were sold short for. It does not mean the price will drop as long as there are buyers on the asked.
Adding the 400m to the float to cover the shorts and not have a squeeze from taking place, means more shares have to be taken out on the asked to see any rise on the bid price. It will take longer and be more difficult with 400m added to the float used to close out shorts.
If they shorted 400m for $.10 regardless if the price rises or falls the shorts are covered by the company issuing the 400m as debt is paid and for a fraction of the shorted price. That debt conversion will prevent any short squeeze from ever happening.
This way the shorts make money up or down and the company debt is paid to a 3rd party note holder (usually the CEO)
If there is no asked pressure the only ones who will make money are the shorts and the CEO. BUT BEWARE! if the shorts have unlimited shares to dilute into the float, they can spiral the price down lower and lower to prevent any investors from selling at a profit.
Anyone cost averaging will be buying more debt shares for less allowing the float to increase and more dilution, killing the price.
That death spiral is not good but well have to wait and see.
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