Replies to post #54294 on e.Digital Corporation (fka EDIG)

[Cassandra]

24601: Absolutely not! Traditional preferred convertible shares are not "death spiral" financing since each convertible share is tied to a fixed number of common shares. This can be an excellent form of financing.

However, "toxic" or "death spiral" convertibles for a fixed dollar amount per share and the number of common shares into which they can be converted is based on a formula set forth in the financing covenants. In the case of the Series E convertibles, the number of conversion shares is based on the volume weighted price of the previous 10 trading days or $0.45, whichever is lower. The financiers are incentivized to short the stock and cover later.

Unfortunately, e.Digital has always used the toxic form of preferred convertibles, which has brought about massive dilution of shareholder value.