3 ms·

To be fair equity is just another type of debt. If you can retire it and replace it with debt that cost even less then it's quite a sound move.

MilStdJunkie 3y ago
I wasn't aware that was a thing - how is equity a type of debt? They seem to differ in their core concepts. I'm not being snarky or anything - I'm genuinely curious about the reasoning! Equity debt, I get that, it's like a home equity loan, or, well, a corporate bond, kinda. Assuming that equity≅debt - which, respectfully, I'm not - isn't it comparing an unknown rate of depreciation + an unknown future commodities market versus a very known interest rate environment? The latter of which, circa 2018, there was nowhere to go but up, and everyone knew it. Depreciation . . aerospace, forecasting is crap even assuming it even exists; I'm lucky if they know what's on their own shelves. A lack of fundamental comprehension of what the word risk actually means . . eh, that's endemic, actually.
- spott 3y ago
  Equity is an ownership stake in a company, including an ownership of future profits. In some sense a company is promising in the future to return profits to shareholders. While the company is in a growth stage and healthy, that need to return profits to shareholders is put off indefinitely. When a company is healthy but not growing, they are expected to return those profits to shareholders (the debt comes due). I agree that it is a shaky metaphor, but the idea that equity/debt is a promise to return money to the holder eventually can allow you to put them in the same bucket if you squint.
  - drumhead 3y ago
    The equity is the part of the capital of the company which is owed to shareholders. It's their money retained by the company to fund it's operations. Its not a metaphor it's actually what it is. It's literally a liability of the company.

3 ms·

To be fair equity is just another type of debt. If you can retire it and replace it with debt that cost even less then it's quite a sound move.

by drumhead 3y ago

MilStdJunkie 3y ago
I wasn't aware that was a thing - how is equity a type of debt? They seem to differ in their core concepts. I'm not being snarky or anything - I'm genuinely curious about the reasoning! Equity debt, I get that, it's like a home equity loan, or, well, a corporate bond, kinda. Assuming that equity≅debt - which, respectfully, I'm not - isn't it comparing an unknown rate of depreciation + an unknown future commodities market versus a very known interest rate environment? The latter of which, circa 2018, there was nowhere to go but up, and everyone knew it. Depreciation . . aerospace, forecasting is crap even assuming it even exists; I'm lucky if they know what's on their own shelves. A lack of fundamental comprehension of what the word risk actually means . . eh, that's endemic, actually.
- spott 3y ago
  Equity is an ownership stake in a company, including an ownership of future profits. In some sense a company is promising in the future to return profits to shareholders. While the company is in a growth stage and healthy, that need to return profits to shareholders is put off indefinitely. When a company is healthy but not growing, they are expected to return those profits to shareholders (the debt comes due). I agree that it is a shaky metaphor, but the idea that equity/debt is a promise to return money to the holder eventually can allow you to put them in the same bucket if you squint.
  - drumhead 3y ago
    The equity is the part of the capital of the company which is owed to shareholders. It's their money retained by the company to fund it's operations. Its not a metaphor it's actually what it is. It's literally a liability of the company.