I can’t again right now. It makes a company a piñata for dilution. It creates dilution on steroids. But that is not what they are created. They are a common financing arrangement leading to often very good terms to finance a company, as was the case here. But if a catastrophic event happens they basically unwind years worth of financing all at once and on the most distressed terms. That is what happened here.
In my experience, shorts love them. Think mosquitos in a box and then a nice juicy blood filled arm with lots of thick showing arteries is thrust in. Feeding frenzy!
In my experience, when shorts know these clauses exist in contracts, they will do anything to break the piñata and spill out all the shares. It’s the lotto, for shorts.
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