It is a sign of the times that a blog such as mine, dedicated to micro questions (on corporate finance and valuation), is bogged down on the macro question of sovereign default and its consequences. But there is no getting around the fact that corporations and investors will spend the next week focused on the circus in Washington DC and not on their core businesses. So, let's ask the key questions: What is it that investors fear will happen next week? And what if those fears become reality?1. Default: Perception versus Reality The US will not default next week or in the near future, even...
Stay Private vs Going Public: Changing landscape
For much of the last century, as public equity markets have grown, the choice for owners of private businesses that had growth potential was a simple one. Stay private, with limited access to equity capital or go public? In making the decision, the owner weighed the pluses and minuses of a public offering. On the plus side, liquidity increases and you have access to far more capital, generally at a lower cost, since the investors buying your equity tend to be more diversified (and thus willing to overlook a portion of the risk in your company). On the minus side, you risk loss of control...
Default and Bankruptcy: Black, white and shades of grey
The talk of default is all around us, as we watch Greece and Italy struggle with impending disaster and the fight over debt limits in the United States fills the airwaves. But what is default? What are the consequences? And given a choice, when is default the best option?Let's start with the most basic question. What is default? Most people would view it as the failure to meet an obligated interest or principal payment. That may technically be true, but it does not capture the shades of grey that characterize default. In fact, the ratings agencies seem to have thrown the Greek situation into tumult...
