Equity and Debt Amsc Has Research Proposal

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4 million during its most recent quarter before the decision to take on equity financing (American Superconductor opts for secondary offering, 2003). Therefore, with cash reserves of only $12.1 million, there's some concern that the company could not make regular monthly debt payments on an ongoing basis. In particular, a forecast for a reduction in the cost of funding operations from $48 million to $13-$15 million is pretty drastic for a growth company and AMSC may end up with more operational costs than it is currently anticipating. Even if it could meet the regular debt payments, AMSC can use the money that would have gone towards those debt payments to further invest in its business which appears to have exciting growth potential.

With the equity financing choice, payment distribution to shareholders occurs on a yearly basis at which time the company can determine appropriate dividend payments after it's fully aware of its yearly financial performance.

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This situation can be very good for shareholders if AMSC performs as intended.

Although there are a few draw backs, these are not serious. True, additional equity financing means relinquishing more company control, but the company is already public. As such, AMSC is under the pressure of investors and subject to the extensive reporting and legal and regulatory compliance requirements that come with being a public entity. Currently, AMSC is entirely equity financed and this may not necessarily be desirable in the future. but, AMSC can always buy back shares to establish a new equity structure as appropriate for its cash flow situation......

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