Since the announcement, the SLB’s price has outperformed +1.2%, reflecting the higher coupons investors will now receive. This outperformance validates the option pricing approach to SLBs pioneered by the Anthropocene Fixed Income Institute (AFII).
However, it also suggests that investors are not factoring in likely target misses into SLB prices ahead of time. The AFII had previously reported on LONQUA's announcement in March that it was likely to fall short on its emissions goals. At the time, the market did not respond.
