Your mother in law seems to be way smarter than you. The smart lady know how to take from both of the world. The conservative approach and growth approach both.
Here some info for you.
Debenture: Is not stock, but company borrows money from you at a fixed interest rate and every quarter or so they mail an interest earnings. When u buy debenture you are lending money to company to earn an interest.
But if the debenture is convertible, then after the period mentioned on debenture the debenture will be recalled and u get equivalent stocks. Mean while u already earned interest for few quarters. That brings yr stock purchase price lower than the market.
1. If the company offered the debentures only to existing common share holders, then, yes, she need to buy debenture to take advantage of the reward. But she have a choice not to buy any debenture. If she know the companies performance is outstanding then it is better to take the adavantage by buying debenture. If she decide not to buy debentures, she may sell the warrant (the offer letter of debenture) to some one else who is not currently a share holder but craving for debenture.
2. The company may have offered debenture to any one.In that case one don't need to be a common or preferential share holder of the company. After the maturity period the buyer will automatically become a share holder, if the debentures are convertible to stock. (If they are non-convertible, u get your money back-just like a bank CD)
I hope this helps. Let me know if u want to know more about this debenture stuff. I was a big player on this in past.