What does the choice between cash and stock consideration signal to the market, and why might an all-stock deal be read negatively?

Beyond financing capacity, the cash-vs-stock choice carries an information signal (Myers-Majluf logic). Managers know their own stock's value better than the market; issuing stock to pay for an acquisition is rational when they believe their shares are fully or over-valued — so the market may read an all-stock deal as a signal the acquirer thinks its own equity is rich, and the acquirer's share price often falls on announcement. Paying cash, by contrast, signals confidence (you're willing to commit cash and not dilute) and that management doesn't think its stock is cheap. Stock also shares risk: in a stock deal target shareholders bear part of the downside if synergies disappoint (and upside if they don't), whereas cash transfers all the deal risk to the acquirer. So all-stock can be negative both for the signalling (overvaluation) and because it dilutes and shares control. The nuance: stock can still be right when the target is risky, the acquirer genuinely wants to share risk, or cash/debt capacity is constrained.