death spiral


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Death Spiral

A loan that investors give to a publicly-traded company in exchange for convertible bonds. The convertible bonds give the investor a right to buy shares in the company at a low, agreed-upon price. However, issuing these bonds creates more shares outstanding when they are converted, which results in a drop in the share price. The low share price encourages more bondholders to convert their bonds to equity, which causes a further drop in price and the process continues. Because of this disadvantage, companies only engage in death spirals if they badly need cash.

death spiral

The deteriorating financial condition and associated stock price of a cash-starved company that can raise capital only under the most onerous of terms. Restrictions and high interest charges on new capital cause the company to end up in an even worse financial position.
References in periodicals archive ?
America escaped this death spiral once before, during the Gilded Age of the late 19th century.
The Aetna CEO is the one who said Obamacare was in a death spiral, and he said it when the government didn't back his merger," Sellers said.
The strategy didn't work as they fell into a compliance death spiral and closed.
Related: Aetna exec sees ACA risk-adjustment death spiral Aetna: Saving the ACA exchange system is a good investment
2014] that the Officer Corps is in a blind, intellectual death spiral is weighty indeed, but ignores the vast body of debate going on in the junior and senior ranks of our nation's military.
Thomas Jefferson's Enlightenment: Paris 1785 is a unique, biographical portrait of American Founding Father Thomas Jefferson, focusing on a crucial turning point in his life - when he witnessed the death spiral of the French monarchy, destined to culminate in the French Revolution a few weeks before Jefferson returned home.
Nor will lower enrollment among young adults, even in the extreme, lead to a so-called premium death spiral and market failure," the report concluded.
Co-author Peter Eisenhardt, WISE project manager at NASA's Jet Propulsion Laboratory, Pasadena, California, said that at first they thought this galaxy's unusual properties seen by WISE might mean it was forming new stars at a furious rate, adding that on closer inspection, it looks more like the death spiral of merging giant black holes.
Washington, Ramadan 10, 1434, July 19, 2013, SPA -- The city of Detroit, saddled with billions of dollars in debt, filed Thursday for bankruptcy protection, the latest step in the death spiral of a American city that is the traditional home to the US auto industry.
usually from their death spiral struggle to attract advertising revenue or monetize their customers)
This pattern--low cash leads to increased borrowing, increased interest, lower profits, lower retained earnings, higher liabilities, increased current liabilities and even lower cash flow--can quickly become a death spiral.
The looming collapse is causing Islamic terrorists to rise--and its death spiral threatens the West as well as itself.