calculation of optimal capital structure?

Question

Company is technically insolvent with large net balance sheet deficit. Company has no borrowings, its liabilities are made up of provisions. Sore shareholder wants to recapitalise it and restructure the balance sheet for the company to be able to meet future commitments and be able to fund those commitments in the capital markets on a stand-alone basis

Answer 1

need more information., your nature of business., and is there is any loan requirement etc..,

Answer 2

This is quite a problem. No wonder there is a sore investor.

Let's think about the alternatives:

1. Sell private equity. If company continues to do poorly, new shareholders take the biggest losses. If company does well, old shareholder takes biggest gains. Well -- that isn't going to work.

2. Borrow money. If company continues to do poorly, new investors take the biggest losses. If company does well, old shareholder takes biggest gains. Well -- that isn't going to work.

3. Sell firm to someone who can turn it around. This might be the best alternative.

Option one might actually work if you sweeten the pot. In addition to giving shares of stock, you can also offer them a warrant. That way, they get a bigger share of the company if things go well.