Convertible hedging 101Excellent post from the Yahoo board:
It was very likely btw, that the holder did not have a naked long position. A major strategy is convertible arb - long the notes and short the common, either through a direct short or via options. Basically they buy cheap volatility and sell expensive vol.
So, there could have been a large short cover as part of the transaction. It doesn't affect the company, just a point of info. If it was hedged position, the holder chose to cover his shorts (a bullish trade). If it was not hedged, then the buyer swapper debt for equity, also a bullish trade. Seems to me the swapping holder saw little downside in the stock based on three good financial quarters and decided he could make more money with the stock.
Almost always there early redemptions are seen (correctly) as bullish. Deleverages the B/S if nothing else. I think the bashers are hoping its a bad thing, But it's not.