This paper investigates how the market reaction to debt and equity offers is influenced by investors' expectations as to the type of security to be issued. We find a significantly positive 1% announcement day return for debt issues made by firms that would normally be expected to issue equity. In contrast, the market reacts negatively when firms that are expected to issue debt issue equity instead. These results suggest that the informational content of public security offerings is conditioned by investors' prior beliefs. Further, our results also support the prediction of asymmetric information theory that debt issues convey good news relative to equity issues.