What is a Complex Capital Structure?
Complex capital structures involve the creation of a multi-faceted series of securities that provide the financial basis for the stability of a company. Rather than relying strictly on stock and straight debt as the foundation for the fiscal well being of the corporation, a complex capital structure will diversify the range of stocks, bonds, and options offered as part of the overall securities approach. This diversity allows the corporation the option of diluting some securities if current conditions merit that action.
When it comes to the matter of stock within a complex capital structure, the key element is to provide a range of both preferred and common stock option. In general, a complex capital structure will call for segregating the common stock offered by the company into several classes. This creates several levels of investment by offering shares that carry certain advantages over the ownership of other classes of the common stock. For example, a company may choose to issue both Class A and Class B common stock, with the Class A stock carrying the benefit of limited voting privileges, and the Class B stock utilized as part of an employee profit sharing mechanism.
The multiple capital structure may also include the bond issues as well. As with the stock, there may be varying levels of bond issues involved that are connected with specific projects currently in progress. Each of the bond issues may carry different types of benefits, allowing the corporation to attract a wider range of investors.
A complex capital structure is sometimes referred to as a classified stock structure when the focus is on the utilization of various types and classes of stock options. Because the structure of the stock options do allow for dilution under certain circumstances, the reporting of earnings from the shares will be shared with investors in what is known as a dual presentation. Essentially, the dual presentation will detail the basic earnings per share as well as diluted earnings per share. This double view of performance within the complex capital structure can help investors to understand the broader picture in terms of the past performance of the stock options and the potential for future performance.
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