Convertible notes
Debt that the holder can exchange for a set number of common shares, usually paying a lower coupon than straight debt.
A convertible note is a bond or loan that can be converted into common stock at a stated conversion price. The holder receives fixed interest and the option to convert if the share price rises above that price. Issuers usually pay a lower coupon in exchange for that option.
Traders care because conversion dilutes shareholders when the stock trades above the conversion price. Investors who buy convertibles often hedge by shorting the stock, which can add selling pressure around the time of issuance. Check the conversion price, the share count it implies and any call provisions.
Worked example (illustrative numbers, not real data): 500 million dollars of notes with a conversion price of 50 dollars convert into 10 million shares (500 million divided by 50). That is 10 percent of a company with 100 million shares outstanding.