Convertible bonds are financial instruments that permit bondholders to convert their debt into stock (equity) at a later date, subject to specific criteria, such as the price of the stock. When investors knew that they would buy them, they would issue bonds with an 8% coupon that allowed them to convert the bonds into equity if the company's price rose above a certain point. Despite the project still being in its infancy, the convertible bond may have been the best option for the company because it would allow them to pay lower interest payments. If the investors converted their bonds, the other shareholders of the company would be diluted, but the firm would not be required to pay any interest or principal. An investor buying a convertible bond may believe it is a wise investment since they will benefit from the stock's upward movement if the project succeeds.