Some loans are structured so the worse the stock performs, the more shares get issued. And the more shares get issued, the worse the stock performs.
It’s called death spiral financing. The instrument is usually a convertible note with a variable conversion ratio, and in micro-cap markets it’s one of the most reliable destroyers of shareholder value ever invented.
In episode 3 of Watchlist Wire, host Atlas and co-host Michael walk through how toxic convertibles work mechanically, trace the death spiral in real time with specific numbers, identify the three SEC filings that reveal whether a company has signed one, and unpack the management dynamics that lead companies to sign these deals in the first place.
No stock tips. No hype. No promises about getting rich. Just a structural breakdown of one of the cleanest predictors of catastrophic loss in the micro-cap market.
Next week: the reverse split, and why so many micro-cap reverse splits signal more pain to come rather than a fresh start.
watchlistwire.com
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