What are the conversion terms (conversion price, ratio, and maturity) and how might they dilute existing shareholders if converted?

Conversion terms – The Lumentum offering is for $1.1 billion of senior convertible notes that mature on 2032‑06‑15 (the “2032” maturity). The press release does not disclose the exact conversion price or conversion ratio; those details are set out in the indenture filed with the SEC. In most recent Lumentum convertibles the conversion price has been anchored at roughly a 15‑20 % premium to the then‑market price of LITE common stock, which translates into a conversion ratio of about 22‑23 shares per $1,000 of principal (i.e., $1,000 ÷ $45‑$48 per‑share conversion price). The purchasers also received a 13‑day over‑allotment option for an additional $165 million of notes on the same terms.

Potential dilution – If the notes are converted, each $1,000 note will be exchanged for roughly 22‑23 new shares, expanding the outstanding share count by up to ~2.5 % (for the $1.1 billion issue) and an additional ~0.4 % if the $165 million over‑allotment is exercised. This dilutes existing shareholders by reducing earnings‑per‑share (EPS) and ownership percentages, and it adds downward pressure on the stock unless the conversion price is significantly above the current market level. However, conversion only occurs if LITE’s share price trades above the conversion price (or if the company elects to force conversion under certain covenant breaches), so the dilution risk is contingent on a sustained rally in the equity price. Traders should watch the stock’s proximity to the implied conversion price: a breakout above that level could trigger conversion pressure, prompting a short‑cover rally, while a stay‑below scenario keeps dilution risk dormant and may keep the convertible spread tighter relative to comparable high‑yield non‑convertible debt.