With rates jacked to the roof and stock values collapsing, any company with negative free cash flow and large amounts of debt are in serious danger of collapse. We have a real time tool inside Stocklabs to examine debt/market cap ratios, which I prefer over debt/equity — which I believe to be shit.
This much is known.
Companies enjoyed cheap credit for over a decade and borrowed to the hilt, never bothering to build a FCF positive business because of incompetence. Now with everything unraveling, these companies will either bust or be forced to partake in dilutive PIPE offerings in order to stay afloat, some with very amusing “death spiral” features.
Here are some stocks that hit this screen that are worth sharing.
(Stock/debt-mkt cap ratio/debt)
MSTR 1.37X $2.44B
UONE 2.7X $858M
CMLS 6X $1.16B
RRGB 6X $663M
RXT 2.9X $4B
WE 5.8X $21B
F 2.85X $135B
GM 2.3X $109B
CHTR 1.2X $95B
PCG 1.8X $46B
AAL 5.3X $45B
WBA 1.1X $37B
CCL 3.1X $36B
CZR 3X $26B
TEVA 2.6X $23B
The list goes on and on.
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Zombie companies. Force them through conventional bankruptcy.
Borrowing more debt with the inability to pay current debt is asinine.
Thanks Keynesian theory.
What happened to breaking down large companies?