Distributions, bad deals and accounting changes are draining net book value from many U.S. companies. Most investors aren’t bothered, even by negative shareholders’ equity. It could be storing up trouble. If it isn’t, the accounting gnomes should be rethinking their rules.
Twenty-four companies in the U.S. S&P 500 Index have negative common shareholder equity, according to Eikon data from Refinitiv. Philip Morris International, AbbVie, Yum Brands and McDonald’s top the list in dollar terms.
According to O’Shaughnessy Asset Management in April 2018, “In 1988, there were only 13 U.S. companies with negative equity with a combined market cap of $15 billion and now there are over 118 which combine to represent $843 billion dollars in market cap.” Martin Hutchinson is a former investment banker, journalist and Breakingviews columnist who writes a weekly column on economics and finance, “The Bear’s Lair,” and contributes to various publications. Martin is the author of “Great Conservatives” and, with Kevin Dowd, of “Alchemists of Loss” .
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