For some recently public companies, total assets minus total liabilities is a positive number, but shareholders' equity is negative. In some cases, this appears to be the result of a past sale of preferred shares. Credo (NASDAQ: CRDO) offers one such example:
In other cases, the shareholders' equity appears to be negative as the result of a SPAC acquiring or merging with the company in return for common stock with a guaranteed redemption value (perhaps guaranteed for only a fixed length of time). Vistas' acquisition of Anghami (NASDAQ: ANGH) may be an example of this:
The negative shareholders' equity in these examples (and similar examples) seems like it could be a concern to investors. But should it be? If net income is also negative and will be so for a long time, are there ways that shareholders' equity can flip back into positive numbers without the company selling more stock?
Note: This question has some similarities to this earlier question about McDonald's, but my understanding is that shareholders' equity is negative for McDonald's because total liabilities exceed total assets (in part due to 10b-18 buybacks), rather than because of various stock sales as in the above examples.