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Can Equity Value be negative?
Answer
No — equity value (market cap) cannot be negative because of limited liability. Shareholders can lose up to 100% of their investment, but no more. Stock prices have a floor of $0. If debt exceeds asset value, equity goes to zero and the residual loss is borne by debt holders, not equity.
Why interviewers ask this
Don't confuse equity value (market cap, ≥ $0) with shareholders' equity on the balance sheet (book equity, which CAN be negative — see the related question). Limited liability is the legal protection that creates this floor.
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