Financial term of the day, Saturday 1st of November 2014:

Death Spiral Convertible

Used by companies that are in such bad shape, that there is no other way to get financing. This instrument is similar to a convertible bond, but convertible at a discount to the share price at issuance and for a fixed dollar amount rather than a specific number of shares. The further the stock falls, the more shares you get. Popular in the mid to late 1990s. Also known as toxic convertibles or floorless convertibles.

Similar financial terms

Death Spiral Convertible
Used by companies that are in such bad shape, that there is no other way to get financing. This instrument is similar to a convertible bond, but convertible at a discount to the share price at issuance and for a fixed dollar amount rather than a specific number of shares. The further the stock falls, the more shares you get. Popular in the mid to late 1990s. Also known as toxic convertibles or floorless convertibles.

Death Valley Curve
In venture capital, refers to the period before a new company starts generating revenues, when it is difficult for the company to raise money.

Convertible bond
An issue giving the bondholder the right to exchange the bond for a specified number of shares of common stock. This feature allows the bondholder to take advantage of favourable movements in the price of the issuer’s common stock.

Zero-coupon convertible
A zero-coupon bond convertible into the common stock of the issuing company after the stock reaches a certain price, using a put option inherent in the security. It might as well refer to zero-coupon bonds, which are convertible into an interest bearing bond at a certain time before maturity.

Convertible preferred stock
Stock that can be converted to common stock if the investor wishes, at a set price per share or by a specified deadline.

Convertible securities
Bond or preferred stock that can be converted to common stock if the investor so chooses.

Convertible price
The contractually specified price per share at which a convertible security can be converted into shares of common stock.

Convertible bonds
Bonds that can be converted into common stock at the option of the holder.

Convertible eurobond
A eurobond that can be converted into another asset, often through exercise of attached warrants.

Convertible exchangeable preferred stock
Convertible preferred stock that may be exchanged, at the issuer's option, into convertible bonds that have the same conversion features as the convertible preferred stock.

Convertible security
A security that can be converted into common stock at the option of the security holder, including convertible bonds and convertible preferred stock.

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Common stock equivalent

A convertible security that is traded like an equity issue because the optioned common stock is trading high.


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