The equity cushion myth: What the WeWork saga can teach us

Margins of safety can be thin at worst of times

A margin of safety is a wonderful thing for a company. It could be an unassailable market position, an industry-leading level of competitiveness or similar.

As investors, we love margins of safety. It gives us confidence that companies can overcome challenges and therefore confidence to buy or hold onto investments when times are tough.  Sometimes, bondholders will say that a large 'equity cushion' is a margin of safety.  The interplay between liquidity and economic growth An easy way to think of the equity cushion is how much the equity market loves the company in question. Of the total valuation of the company, how much is equity versus debt? The theory goes that if a company has a significant amount of equity value relative to it...