Death Spiral

A type of loan investors give to a company in exchange for convertible debt, which, like a convertible bond, typically has provisions that allow the investors to convert the bonds into stock at below-market prices. This can lead to the original shareholders losing control of the company.

Investopedia Says:
This type of loan is undertaken by companies that desperately need cash. It is called a death spiral because companies' stocks often plunge drastically after they take on these types of loans. Investors can short the company's stock and try to drive its price down. The falling price results in more shares for the investor who chooses to convert. The short position can be closed out with the shares received from the conversion.

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Type of convertible (to common stock) bond or preferred stock issued by a distressed company where the conversion ratio increases as the market price of the common stock drops. As the common drops because of potential and actual dilution, deteriorating finances, and short selling, original common holders progressively lose control.

Death spiral may refer to:

• Spiral dive, a terminal situation in flying
• Death spiral (figure skating), an element of pair skating
• Death spiral (insurance), an insurance plan whose costs are rapidly increasing
• Death spiral financing

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