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Can someone explain what is "recapitalization of its equity"
by ravivyas 7y ago
Can someone explain what is "recapitalization of its equity"
- rolltiide 7y agoIt means they were broke af and in a death spiral because nobody wanted to buy any shares of docker at any worthwhile price, so instead, they created a ton of more shares and sold those and now the organization has capital to do things that makes value for all shareholders
- syedkarim 7y agoFor clarity: Since a ton more shares have been issued, the previous shareholders own much, much less of the company than they once did.
- rolltiide 7y agoand for clarity, this doesn't get them out of the death spiral it is a key part of the concept! but maybe they generate value with their second wind
- phonon 7y agoIt can also mean some shareholders voluntarily gave up certain rights/equity.
- neom 7y agoIt doesn't really mean anything except: we have more money. You might read it as a signal that they didn't want to give details for whatever reason.
- rhacker 7y agoIt means they were in debt. This helps resolve that so that they are basically paying employees instead of death-spiral debt payments.
- hangonhn 7y agoIt could mean a bunch of things but often times it means the previous shareholders were basically wiped out and the company were given a new lifeline to continue operating.
- ska 7y agoTechnically it just means a significant change in the capital structure. In context usually something like: exchange a bunch of debt for new equity, typically with high dilution for existing shareholders. So you avoid dying from that debt in the short term, gain a bit of breathing room to do necessary things (e.g. layoffs) and to fix what is broken in your business model before you start running out of money again. Maybe you are lucky and debt load was the biggest part of the problem - but probably not.