Replies to post #1968 on Mining Company research board

[1manband]

Your use of the term seems to equate the issuance of a single share at a price below the market as toxic

Because that is the specific definition of a "toxic Convertible".

http://www.nasdaq.com/investing/glossary/t/toxic-convertible

http://www.sec.gov/answers/convertibles.htm

"Because a market price based conversion formula can lead to dramatic stock price reductions and corresponding negative effects on both the company and its shareholders, convertible security financings with market price based conversion ratios have colloquially been called "floorless", "toxic," "death spiral," and "ratchet" convertibles."

The SEC's warning on the subject is a good one - investors should pay attention.

These convertibles are killers. A company cannot succeed by issuing shares at a massive discount. The lender has an incentive to drive the price of the stock lower to maximize their return. Thus, the death spiral which kills companies that issue them. It doesn't matter what industry the issuer is in - they are almost always used only for insider enrichment, as no company can build a business through their issuance.