You state: "The debt that Al swapped for equity was just as risky as the equity, so swapping it for shares does not increase his risk." I agree that it is just as risky under the bankruptcy assumption we discussed earlier, but it not at all just as risky under all circumstances. Along the continuum from Bust to Boom, any share price lower than the price in effect when Al did the swap is a net loss to Al. In other words, if the BOD sold MNKD to ACME Pharma for $.50/share, Al takes a huge loss versus the 100 cents on the dollar he would have gotten for the notes.