What are the conversion terms, including conversion price and schedule, and how could they affect the equity upside?

Conversion terms – what we know and what’s missing

The filing only discloses that Hydreight issued 11,500 unsecured convertible debentures at C$1,000 each, raising C$11.5 million. The press release does not specify the actual conversion price, conversion ratio, or the conversion window (e.g., whether conversion can occur at any time after issuance, after a lock‑up period, or only at maturity). In most TSXV‑listed convertible‑debenture financings, the conversion price is set at a modest premium (typically 10‑25 %) to the closing share price on the pricing date, and the conversion right is exercisable either at the holder’s option after a six‑ to twelve‑month lock‑up and then on a rolling basis up to the final maturity (often 24–36 months). Absent the exact figures, analysts must assume a conversion price in that range and a conversion schedule that gives investors the flexibility to convert once the stock trades at or above the set price.

Potential impact on equity upside

If the conversion price is indeed set at a premium to today’s market level, the debentures act as a “floor” for the share price – investors will be incentivised to bid the stock up toward the conversion trigger, providing an immediate upside catalyst. However, once the stock breaches the conversion price, each debenture converts into a fixed number of shares, creating dilution that could cap the upside for existing shareholders. The magnitude of that dilution depends on the conversion ratio = C$1,000 ÷ conversion price. For example, a C$2.00 conversion price would yield 500 new shares per debenture, diluting roughly 5 % of the post‑conversion equity (assuming ~10 M shares outstanding). Conversely, a higher conversion price (e.g., C$3.00) would dilute less, but would also require a stronger price rally to trigger conversion. Traders should watch for any upcoming conversion windows—typically announced in a supplemental prospectus or filing—because a pending conversion can generate a short‑term squeeze as investors scramble to position ahead of potential dilution, followed by a possible sell‑off once conversion occurs. In the near term, the news of a fully‑subscribed offering and the implied confidence of the lead agents can support bullish bias, but the upside is ultimately bounded by the undisclosed conversion mechanics and the resulting dilution profile.