If you are not referring to a decline in each shareholder's % holding of the company - due to share issuance, then don't use the word 'dilution'. Dilution is a specific term - and indicates that each shareholder's investment loses value, without the value of the company changing.
Under your scenario of all taking up BOO and all converting - this is not what is happening. All % holding stays the same, and there is no movement in the total value of each investor's holding - unless there is movement in the overall value of the company.
I do understand your concerns regarding excess expenditures - and think they are fair complaints.
However try not to use the word dilution as that signals something else entirely different than what you are talking about.
http://www.investopedia.com/terms/d/dilution.asp
PS - in your 33% drop calc - you're forgetting a key piece here. Don't forget the $22.4m in cash that will be injected into the company from conversion. This should lift the market cap. Which at 4c the market cap would be about 44.8m right? So injecting 22.4 in cash should in theory make the company worth $22.4m more, or 50% more - bringing it to 67.2m. So if everyone converts, we should also see a ~50% increase in the market cap of the company, with a 50% increase in the number of shares. So we shouldn't actually see a change in the SP as a result.
