Security Analysis by Benjamin Graham and David Dodd was first published in 1934. It is a fundamental book for serious students of value investing.
In chapter 24, the authors describe the various technical aspects of convertible issues and their merits.Mr. Graham and Mr. Dodd explain the dilution factor in the case of convertibles which results in an accepted antidilution factor. However, despite this protection, there is a possibility of loss when a huge premium is priced in.
Furthermore, the authors discuss the unattractiveness of the sliding scale arrangements as it increases the chance of losses and creates a sense of urgency for investors. There are various exotic conversions floated in the markets that should be either avoided or carefully studied for any rare profit opportunities.
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