(a) If an entity receives cash and gives the investor the option to convert the amount into a fixed number of shares, then it's an equity instrument classified as equity. (IAS 32 11 (a) (i) & (b) (i))
(b) If an entity received cash and gives the investor the option to convert the amount into cash, with cash being the fair value of the fixed number of shares into which the instrument would have converted if it had been converted. Then the instrument is a liability.
Is it because point (b) does satisfy IAS 32.11 (a) (i) ? Even that in (a) the investor can sell the shares at the market and get the same amount of cash in return vs (b).