When you own something that means you have the right to do pretty much whatever you want with it. That is the fundamental social contract with private property. If I want to buy a bunch of diamonds and smash them with a hammer then I can do that, regardless of whether you think it's a good idea.

Businesses fail for all sorts of reasons. Sometimes they get too aggressive with the capital structure and blow up. This is a feature, not a bug. While the experience may be painful for some stakeholders in the short term, over the long term this creative destruction unlocks latent value and increases economic growth.

And if old shareholders want to prevent new shareholders from having the ability to destroy the company then that's easily accomplished. Just establish separate share classes with different voting rights. Many companies already do this.