Here's my rough understanding. If I am off base and someone wants to correct me, I have no problem being wrong. I'm certainly no expert, I just read and research a lot.
If you gave a company a loan that is convertible to shares at some future point, and the conversion value is based on the stocks lowest price at that period of time, it would benefit you to convert as low as possible so you receive more shares. Loan value / share price = the amount of shares you get.
When you take the option to receive shares as payback for your loan, those shares are added to the total OS and now you own them at whatever price you converted at. It's up to you at that point to sell or hold on to them. Either way, they have already been issued and added to the OS total.
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