Floorless convertibles, sometimes called death-spiral financing, let lenders convert debt into equity at a floating discount with no hard floor. If the share price falls, more shares must be issued to satisfy the same obligation.
Why it matters
This structure can destroy per-share value quickly. A stock that looks optically cheap can become much cheaper on a per-share basis as the conversion terms keep resetting lower.
Red flags
- reset provisions tied to low VWAP windows,
- registration statements filed soon after the financing,
- rapidly rising share count with falling price,
- and management language that treats repeated issuance as normal operating finance.
Use this term alongside Avoiding Serial Diluters, How to Spot Dilution Risk, and the live Share Changes table.