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clock Created with Sketch. 26/12/21
18:24
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Originally posted by Realinvestor1:
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why do you think you know everything? It is very clear you understand nothing about death spiral debt. I have been investing over the last 25 years and have seen death spiral debt first hand. Being chartered accountant by profession and associate professor of financial management and investment analysis at a reputed Australian University, I teach about the death spiral debt to my students everyday including the case studies. This deal is not even close to what death spiral debt is. Firstly it’s not a debt, this is smartly executed deal by HIO management. In a typical death spiral debt, the finance provider has the right and discretion to convert the convertible debt or convertible notes into equity at the time favourable to the financier. This motivates the financier to short the stock and send the price plummet then provide notice to convert the debt into equity to get gagged number of stocks. They then sell the converted stocks again, panicking the market causing the SP plummet further. HIO’s deal is exactly the opposite. The facility is used at the discretion of HIO, and they have put a clause of MAP. HIO can set the floor of SP at the time of exercising put option by HIO. There will be no motivation for the financier to short the stock because if they sell it below their issue price, they will certainly lose money. Because they won’t know when HIO will next exercise put option.
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Good to know your background, this really remind me sometimes ago while i was in Uni with my investment & accounting course.
