XANADU - Also from 10Q -
The most simpe way would be to short the stock at higher levels in anticipation of conversion. I've seen it happen before.
The convertible debentures issued to Golden Gate Investors, Inc.
are convertible into shares of Company common stock at an 18% discount
to the trading price of the common stock prior to the conversion. The
significant downward pressure on the price of the common stock as the
selling stockholder converts and sells material amounts of common
stock could encourage short sales by investors. This could place
further downward pressure on the price of the common stock. The
selling stockholder could sell common stock into the market in
anticipation of covering the short sale by converting their
securities, which could cause the further downward pressure on the
stock price. In addition, not only the sale of shares issued upon
conversion or exercise of debentures, warrants and options, but also
the mere perception that these sales could occur, may adversely affect
the market price of the common stock.
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