Freeport-McMoRan (FCX)

[eddy2]

https://www.economist.com/the-economist-explains/2018/02/12/the-roots-of-hyperinflation

Let’s look at this from another prospective that could be far less confusing. We know the par value of the stock is its debt cost.

Let’s look at an example. The par value is set at $.001. The shares are selling for $10. The debt backing the equity is valued at $3.00. You can see this is not a good deal relative to the $10 paid for the $3 of debt paying out .001 in capital cost.

Now let’s change the figures up some. Let’s say we are paying still $10 per share the par value is still constant at $.001 but the debt we are purchasing is now valued at $15 dollars. Now we have $15 dollars of debt that was purchased with a rise in outstanding shares from ten million to over a billion times the par value is the capital cost to the company owing too the shareholders “ share holders deficit “. The debt owing that was bought by the shareholders is now $15 times the outstanding debt.

Now of course this is all relavent if and only if the debt can be paid a long with its capital cost. You can see that under a restructuring the share holders may only receive pennies on the dollar so in the end everything works out for the early and later investors.

This is of course if the early investors bought in on a short position or derivative ie: warrants ect. that are offered throughout the cycle of events. You always want to hedge “ short sell “ for the difference between your debt held and debt cost.

I hope this helps clarify things. The debt owned is your treasury stock and the deficit is the total par value times the outstanding share count. If there is no par value mentioned then subtract the share holders deficit by the number of outstanding shares owed. This will give you the par value that is always a constant regardless of the amount of debt now held by the equity holders.