This is just patently incorrect.The value/return of the...

This is just patently incorrect.

The value/return of the Convertible Notes is in their embedded option value. For a very high beta stock such as Zip and a very long dated option (7 years), the value of the option would be significant (I'm sure you know how the Black Scholes option valuation model works). In order to protect that option value, the CN holders enter into the Delta Hedge. As the name indicates, the purposes of shorting a certain number of Zip shares at the time of purchasing the CN's is to "hedge" that option value such that they are not affected by the Zip SP going down (with any reduction in the value of the options being offset by an increase in the value of the short and vice versa).

These types of Convertible Notes (referred to as Convertible Bonds in the US) have been a very popular financing method for many high growth companies in the US for a number of years, where investors are often happy to leave the option unhedged in order to enjoy the benefits of any SP appreciation. Painting this market which is estimated to currently stand at US$700b globally as companies "dealing with the devil" is a flat out lie.