Yes but its looking mighty DIM for SFLK as the Dimgroup pointed out in another article on the same link you gave us. A BEVY of good news when SFLK did that 3 million in equity debt financing in convertible preferred and the stock continues to STINK!!
Convertible Debentures & Stock Prices
dimgroup.com
What is a debenture
An alternative way to raise capital other than by the issue of shares is to borrow the money by way of debentures. The issue of debentures is a method used by a company for obtaining long term loans. A document or certificate is issued by the company, which acknowledges the indebtedness of a stated sum of money and specifies the rate of interest and repayment date(s) or conditions of repayment.
A shareholder participates in any profits of the company which are available for distribution through the medium of dividends which must first be declared before he enjoys any right thereto. A debenture holder on the other hand, receives interest at a predetermined rate which is payable at fixed times, irrespective of whether the company earns sufficient profits.
A debenture holder is a creditor of the company in contrast to a shareholder who is a proprietor of a company. Therefore debenture holders rank higher than shareholders in the line for liquidation proceeds.
Making a debenture Convertible
Often to attract financing a company must make the debenture more attractive. This may take the form of making the debenture a convertible one where the holder could convert the debenture into shares of the company. Additionally, many of these convertible debentures often offer a discount to average trailing price which can range from 65-80%.
If the holders of the convertible debentures convert their debentures into stock this acts as an immediate dilution of the outstanding shares often at large multiples. While this factor is important to keep in mind an even more controversial question concerns whether the holder of convertible debentures sell short the shares of the company they hold the debentures in.
A common opinion amongst anti Debentures is that the holders of these debentures sell the shares of the company short, helping drive down the price so they can convert their debentures into more shares. Logically such a move would seem practical as this would offer the debt holders a method to regain their capital and maximize their profits. However for holders of the stock this is not good news as the stock price is sure to fall.
Pro Debentures however argue that presence of the debenture holders in many cases help the company to survive. It offers capital to a company that in all likelihood, could not obtain alternative more favorable financing. The capital may help pay off immediate company debts, which might have forced the company into bankruptcy or the capital may be used to help fuel expansion that would not otherwise occur. Therefore, the debentures help a company long term.
Whether you are for or against this form of financing, it is being used more often. Understanding and discussing the possible implications is of benefit to all.
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