Cloud 9fin How to fix a broken balance sheet
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Dec 11, 2024 Mike Harmon, a Stanford lecturer and managing partner at Gaviota Advisors, shares insights from his book on fixing broken balance sheets. He likens corporate debt dynamics to treating sick patients, explaining how even giants like Twitter can fall prey to high debt. The conversation explores the impact of meme stocks on vulnerable companies, while also discussing strategies for restructuring that highlight the balance between vision and practical tools. Harmon emphasizes the need for adaptability in today’s financial landscape, filled with challenges and opportunities.
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Twitter LBO
- Mike Harmon uses Elon Musk's Twitter LBO as an example of how distress can impact anyone.
- Even the world's wealthiest person can face financial challenges due to unforeseen outcomes.
Debt Contract Anatomy
- Understanding debt contracts is crucial for navigating restructuring, similar to a surgeon understanding anatomy.
- Harmon emphasizes this knowledge as an essential business skill.
Zombie Companies
- Harmon defines a "zombie" company as one with too much debt to invest in future growth.
- He distinguishes between interest coverage and balance sheet insolvency as indicators.
