RE:RE:RE:US up AC down Correct. An account who may be short can play on the equity deal to cover their short lower. In a hot deal, a good banker would only give fills to those they knew were going long. Some companies tell the bankers they don't want hedge funds in the buying syndicate for this reason. But buying a deal to cover a short happens all the time.
as for the convert, the reason you short the convert is to lock in the interest payment and reduce volatility in the position. If the instrument yields 6 percent and you pay 30 basis points for the borrow on the short, you lock in 5.7 percent and are insulted from outsized moves in the underlying security.