Floorless convertible
Also called: floorless convertible note, no-floor convertible, floating convertible
A convertible note or preferred stock whose conversion price can fall with the market price without any minimum, so a lower stock price means more shares on conversion.
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How it works
A standard convertible converts at a fixed price set at issuance. A floorless convertible instead converts at a price tied to recent trading, typically a percentage of a low trading or volume-weighted price over a lookback window (see variable-price conversion). There is no floor price below which the conversion price stops falling.
Because the number of shares issued equals the amount converted divided by the conversion price, a lower stock price produces more shares for the same dollar amount of debt.
Worked example
Hypothetical: Company X issues a $1,000,000 note convertible at 80% of the lowest VWAP in the prior ten trading days.
| Lowest VWAP | Conversion price | Shares for $100,000 converted |
|---|---|---|
| $1.00 | $0.80 | 125,000 |
| $0.50 | $0.40 | 250,000 |
| $0.25 | $0.20 | 500,000 |
All figures are hypothetical.
At the lowest price the same $100,000 converts into four times as many shares. The holder can convert in pieces, sell, and convert again.
Why it matters
Without a floor, the maximum share count is not fixed in advance, which is why this structure is the core of what traders informally call toxic financing and is associated with the death spiral mechanism. Some agreements include a floor price after all, or a cap on total issuance under exchange rules such as Nasdaq Listing Rule 5635(d), and most include an ownership blocker that limits how much the holder can own at once.
How to spot it
Read the conversion price definition in the note or certificate of designation, usually an exhibit to an 8-K. Phrases like "the lower of" a fixed price and a percentage of a market price, or "Variable Conversion Price", signal it. See Toxic convertibles.
Related terms
Guides that use this term
Toxic financing · 6 min read
Toxic Convertibles Explained, From Variable Conversion Prices to No Floor
How variable-price convertible notes work, why a discount to VWAP and a lookback window matter, and what happens to share counts when there is no floor.
Toxic financing · 6 min read
Ownership Blockers: Why 4.99% and 9.99% Caps Do Not Limit Total Dilution
How beneficial ownership blockers work, why they cap a holder's stake at any moment but not the total shares issued, and a worked convert-and-sell cycle.
Toxic financing · 6 min read
Prepaid Advances: Cash Up Front, Repaid in Discounted Shares
How prepaid advance agreements work, how the discount, lookback, floor and cash-payment triggers decide the share count, with a worked example.
Toxic financing · 6 min read
Lesser-Known Adverse Terms: Undisclosed Balances, No Maturity, Partitions and MFN
Financing terms that rarely make headlines but change how much dilution a deal can cause, from partitioned notes to MFN and participation rights.
Research pages · 6 min read
How to Read the Dilution Pressure Score: Score, Max Measured and Risk Levels
The seven components of Signal8's Dilution Pressure Score, why it reads as points out of points measured, and how the risk levels and lower bounds work.