Join Date: Mar 2008
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Originally Posted by no1mad
Came out yesterday. Topic was about "recapitalization". Not quite sure what that is....
Capitalization is the money invested in the company, both by bondholders and shareholders, including retained earnings. So, the need to 'recapitalize' just means the company wants more cash, for good or bad reasons.
It could be a good thing, if your current business model is solid. If you can build and open new retail outlets that everyone thinks will generate a better return than the interest on bonds, that would be a good reason to 'recapitalize'. If that was true, the company could float new stock or debt offerings, and doing so would not knock them off the stock exchange.
But, combined with the news of de-listing, it looks very bad. It looks like the current model is broken, and they want cash to pursue a different strategy that they think might work better. It sounds like the memo is trying to put a good spin on very bad news.
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