medium · Investment Banking implied-share-price
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 always be identical figures in this case because cash and debt simply cancel out entirely.
- The share price will always be lower than the implied Enterprise Value per share, since holding cash is treated as an operating drag.
- The Enterprise Value figure must always turn negative in this scenario in order to fully account for the company's excess cash position on hand.
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