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Recapitalization recap A Guide for Investors Recapitalization, commonly referred to as recap, is a strategic maneuver that companies utilize to change their capital structure. It involves altering the balance between a firms debt and equity, and it can serve a variety of business and financial objectives. For investors, understanding recapitalization can be crucial, as it often signals docHub changes in a companys direction and risk profile. Why do companies opt for recapitalization? Several reasons drive a company to opt for recapitalization: Financial flexibility A company might be seeking to reduce its debt burden, especially if it is unsustainable or costly. Shareholder value A company can increase its earnings per share (EPS) by replacing debt with equity or vice versa, depending on the cost of each type of capital. Defence against hostile takeovers By issuing more shares or altering the equity structure, companies can thwart takeover attempts. Optimal capital structure