If the stock price is cheap and debt issuance is at record lows buying shares with debt is a wise decision. I would not like to see this done if the stock was overvalued or debt was expensive. Value would be destroyed in such a case.
Take the case of Intel, who just issued apparently cheap debt in part to buy its stocks. If the market is perfectly valuing the stock price and the bond interest rates then an asset conversion does not change the value of Intel. You are free to believe that.
On the other hand you can believe that the stock is undervalued and debt is cheap. Treasury bonds are near multi-decade historical record lows, and arguably yielding less than inflation. So if you chose to believe that the market is wrongly valuing interest rates and Intel’s stock then swapping debt by stocks is wise.
Anyone is free to think whatever they like. At the end only with time we will know who were the smartest investors.
I agree with what thrivecap wrote as a comment to a recent Intel article on the buyback subject. To reinforce it here is what Martin Whitman wrote about share repurchases on the Agressive Conservative Investor. That is an excellent book recommended by Seth Klarman, also referenced on my list of favorite books:
On an overall basis, buy-ins have relative advantages for stockholders: in the usual case, such receipts of cash are taxed only on a capital-gains basis; on the part of the stockholder, the receipt of the cash usually is optional, rather than mandatory (as is the case with dividend receipts); weak shareholders sell out, with possible favorable implications for future market prices; and if, as is frequently the case, buy-ins are at a price below the value based on corporate reality, the per-share corporate-reality value of the shares not bought in is enhanced.
There are advantages to corporations as well. Insofar as the common stock is dividend-paying and, as is usual, the company desires to maintain a dividend rate, cash requirements for future dividend payments are reduced; earnings per share, book value per share and corporate-reality value per share may be enhanced; and a program can result in the elimination of all, or virtually all, public shareholders. Furthermore, where the price of the stock can be a tool to be used by the company in, say, future acquisitions, buy-ins can result in a more favorable price for shares that remain outstanding than would otherwise be the case.
PD: I continued on the same subject here: Some Words On Share Buybacks II