The convertible bond issue amounts to about 16% of the total market capitalization of the company ($3.5/$21 billion). The issue immediately dilutes the stock by about 9% assuming a .5 delta on the imbedded option, and ultimately by the 16%. Normally in a convertible bond deal, this would cause the stock to fall by the same amount, so you would expect the stock to fall anywhere from $3.5 to $6 from the current price of $38 on the announcement. The stock, however, is up on this deal.
I will leave it to smarter minds to answer why reshuffling liabilities and issuing stock is positive for the stock price. I do have a volatility position in the stock. My expectation for volatility is that it (along with relative option prices) will come down due to the convertible bond issue: The company is selling a large amount of calls to the public, which should dampen the volatility.
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