Death spiral (financing), toxic convertibles, floorless convertibles

A usually windy, unscrupulous corporation – issues an unusually large number of convertible bonds. – If these are converted into a share at maturity, then a dilution of the share capital occurs and – the share price falls accordingly. – If further convertible bonds then mature for exchange, the owners of these securities receive less and less in value because the share inevitably becomes more diluted with each exchange and therefore CETERIS PARIBUS is quoted lower. – The subscribers of the convertible bonds, who have paid cash into the company’s coffers by purchasing the paper, will only get back a fraction of their investment in the end this way. – See anti-dilution clause, dividend fund, squeeze-through, parity, exchangeable bond, anti-dilution.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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