The conversion price is usually set as a discount to the lowest trading price over a recent lookback window. The holder converts, sells the shares, the price falls, the next conversion is cheaper, and the loop repeats. Share counts can rise by orders of magnitude in a year, which is why these companies do frequent reverse-split operations.
Spot them in the filings by the words "variable conversion price", a lookback period, and a discount percentage. Any thesis about a squeeze in a stock funded this way has to survive an unlimited, price-insensitive seller.
Example: a $2M note converts at 80% of the 10-day low. At a $1.00 low it makes 2.5M shares. If the stock drops to $0.20, the same note makes 12.5M shares, and each round of selling deepens the fall.
Related: anti-dilution-provision, dilution, reverse-split, private-placement, penny-stock