Convertible Notes of the kind offered by hedge funds are one of...

Convertible Notes of the kind offered by hedge funds are one of the last lines of funding of any asx listed company. No company with great business prospects and solid capital management planning seeks this type of funding. The company's that do not receive the interest for the higher quality forms of funding end up with no choice but to take this form of funding.

These notes are negative for two main reasons:
1) They carry the perception that they are the last line of funding and as such reflect poorly on the company prospects or management planning when they are taken up.
2) Their dilutionary and trading impact IS UNCERTAIN. There's a simple economic principle - certainty builds value and uncertainty destroys value. These Con Notes create uncertainty.

On ESI's note:

The 2c floor price is an immaterial comfort - it simply means that ECT has the choice to pay back the note instead of allowing conversion into FPO stock. Its a moot option given that ECT doesnt have any money so when the time came to convert they wouldnt be able to afford to repay the note and conversion would occur.

The 1c floor price is some comfort as it allows ECT the discretion to terminate the remainder of the deal. This is a good option to have but if the price was indeed at 1c anyway then the damage to the company from the start of the con note would be >$10.5M market cap and if you include the 2c options then its close to $20M of enterprise value destroyed. At 1c, I dont think many would be comfortable enough to care whether ECT had the option to terminate the deal.

The $2.5M face value is good, given that my understanding is that La Jolla Cove offers min $5M, so whomever negotiated that into the deal should be at least thanked for not creating a bigger potential dilution.

All of that being said, the best way to turn the sentiment around is to deliver deals. At the last AGM, the TINCOM deal was imminent. We're almost at the next one and still nothing material(well at least nothing to the satisfaction of the market).Given that the company had burnt ~$3M over that 12mths and their most exciting deal had not been finalised, it warrants the question, "what was the money spent on?", and "how did that spend get shareholders closer to increased value." Deliver a deal and shareholders wont be worried about the forms of funding.