whats the solution for this problem? related to Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles.

[answerhappygod]

whats the solution for this problem? related to Hybrid
Financing: Preferred Stock, Leasing, Warrants, and
Convertibles.
Amazon sold $1.25 billion in 10-year convertible notes in early
1999, which were issued with a $1,000 par value and a 4.75 percent
interest rate. The bonds had a conversion price of $78.0275, which
meant that investors might convert their bonds into around 12.8
shares of Amazon common stock at any time. The problem is that
because the convertibles can be converted to Amazon common stock,
fluctuations in the stock price will significantly impact the
convertibles' value.
Amazon had its stock price plummet over the next two years,
falling from a peak of more than $100 in 1999 to a low of $5.51 in
2001, a 95 percent reduction. Convertibles fell as well, but only
to $376, a drop of nearly 75%, which was awful but not as bad as
the stock. For two reasons, the convertibles fared better. First,
they paid $47.50 per year in interest against nothing for ordinary
stock. Second, if Amazon went bankrupt, which was a serious
possibility in 2001, the convertibles would have a claim on their
$1,000 par value before stockholders. Amazon's fortunes improved
after the 2001 dip, and by mid-2005, the stock was selling at
roughly $46 per share, with the convertibles trading at around
par.
However, the problem with it is that it can be unfair for the
previous investors. Convertible bondholders receive freshly issued
securities in the form of stocks when they convert their bonds,
which can hurt prior investors. Convertible bonds nearly usually
erode current shareholders' ownership percentage in the absence of
safeguards. As a result, once bondholders convert their shares,
shareholders possess a lesser piece of the pie.