4 Negative Enterprise Value Stocks

Finding stocks with a negative enterprise value is an excellent way to find deep value

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Rupert Hargreaves
Sep 11, 2019
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Finding stocks with a negative enterprise values is an excellent way to find deep value. For a company to have a negative enterprise value, it has to have more cash on its balance sheet than its market value and debt.

This could imply that the company is hugely undervalued -- although not always. It deserves a case-by-case analysis of the situation and the company's strengths or weaknesses.

Nevertheless, studies have shown that negative enterprise stocks do generate outperformance. Alon Bochman, CFA, published his work on this topic on the CFA Institute website in July 2013.

Bochman considered the performance of all negative enterprise stocks trading in the U.S. between March 30, 1972, and Sept. 28, 2012. In total, he assessed 26,569 opportunities.

The average return across these opportunities was 50.4%. Following this analysis, Bochman concluded:

"If you had diligently watched the market over the last 40 years and invested $1,000 into each negative EV stock each month, your average investment would be worth $1,504 after holding that investment for one year, not including trading costs, taxes, and so on."

A handful of stocks are currently in a negative enterprise value position in the current market.

Negative enterprise value stocks

One of these is early-stage biotechnology business Prothena (

PRTA, Financial). Prothena is focused on the discovery and commercialization immunotherapies for the treatment of diseases that involve protein misfolding or cell adhesion.

So far, the company has had limited success. It has lost money consistently for the past six years, and Wall Street analysts expect this trend to continue for the next two years, although they do see reduced losses in 2020.


Nonetheless, the company has plenty of cash on the balance sheet to sustain further cash outflows. At the end of 2018, it reported net cash of $426 million. At the current market capitalization of $350 million, this implies Prothena is dealing at a negative enterprise value of around $76 million.

These numbers are only back-of-the-envelope type calculations and exclude any cash outflows over the past 12 months.

Cash cow

Another negative enterprise value-style investment is Acacia Research Corp. (

ACTG, Financial).
This business invests in licenses and enforces patented technologies. It is not profitable but has a good record of generating cash for investors.


Despite consistent operating losses, Acacia's cash balance has risen from $135 million in 2015 to $166 million at the end of 2018. The current market capitalization of $128 million implies that the stock is dealing with a negative enterprise value of just under $33 million.

Buyout target

Blueknight Energy Partners LP (

BKEP, Financial) is another option. Blueknight is trading with a negative enterprise value of approximately $15.3 million and a price-tangible book value of 0.3. Figures suggest that the stock also supports a dividend yield of 16%.


The oil and gas infrastructure business is clearly an attractive deal at the current level because it recently received a buyout offer valuing the enterprise at $1.35 per share. This offer is slightly above the current trading price of $1.3, so it might be worth a closer look for investors seeking a merger arbitrage play.


The final negative enterprise value company profiled here will be HC2 Holdings Inc. (

HCHC, Financial).

This conglomerate has seven main lines of business, including manufacturing, machine services, insurance, telecommunications and utilities.


Over the past six years, book value has grown at a compound annual rate of 14.8%, although the company's record on profitability has been mixed.

At the current price, the stock is dealing at a price-book value of 0.3. It has a market capitalization of $90 million and a net cash balance of $3.4 billion. Most of this capital is tied up in the insurance business.

Disclosure: The author owns no share mentioned.

Read more here:

Thomas Gayner's Top 3 Investments

Why You Just Can't Ignore Compound Interest

Buffett on Valuing Insurance Businesses

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Rupert is a committed value investor and regularly writes and invests following the principles set out by Benjamin Graham. He is the editor and co-owner of Hidden Value Stocks, a quarterly investment newsletter aimed at institutional investors. Rupert holds qualifications from the Chartered Institute for Securities & Investment and the CFA Society of the UK. He covers everything value investing for ValueWalk and other sites on a freelance basis.