A convertible security whose current stock price is substantially below its strike price. For instance, if the strike price is $20 and the stock is trading at $5, there is no reason to convert the security into stock at $20. Generally, a busted convertible securityÂ’s value as a debt instrument or preferred stock obligation is much higher than its conversion value. Thus, busted convertible securities trade like debt instruments because there is little likelihood that it will be converted into equity.