wanted to understand why would a company have negative equity when the company spend its free cash flow on share buyback as mentioned under the free cash flow to equity ratio topic.
Is it because when cash is used for share buy back, it’s asset reduces, hence its equity reduces?
Also when equity reduces its bad for investors isn’t it? Because equity is what’s left behind for investors when the company goes bankrupt right? How can share buy back increases share holder value then? Hmm..
thanks in advance!