The absence of a maturity date on a company’s equity capital does not mean that one should fail to have a clear strategy in place on how to manage one’s equity position. Equity investors have become increasingly interested in a company’s balance sheet and credit ratings – and perceived under or over-capitalisation is reflected immediately in a company’s share price. Companies should therefore have an adequate tool set in place to respond to this challenge. An imbalanced debt to equity ratio will result in value destruction for its equity investors.
Under-capitalisation
