medium · Investment Banking
If a company has 'Negative Net Debt' (Excess Cash), how does the implied share price relate to the Enterprise Value if we ignore NCI and Preferred stock?
- The Equity Value will be higher than the Enterprise Value, leading to a share price that reflects both operating value and the cash 'premium'.
- Enterprise Value and Equity Value will be identical because cash and debt cancel each other out in the market's eyes.
- The share price will always be lower than the EV per share because cash is an operating drag.
- The Enterprise Value must be negative to account for the excess cash.
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