A leveraged recapitalization sounds like a complicated and scary transaction but, in fact, it's just a combination of things we've seen. In effect, it is a large stock buyback that is funded by the issuance of debt. Let's see how that works. Once again, we'll start with our sample market-value balance sheet. A balance sheet showing the starting conditions before equity issuance: Assets Liabilities and Net Worth Cash $100 $60 Debt Operating Assets $100 $140 Equity 100 outstanding shares at $1.40 per share Now, imagine this company is owned by a private equity fund that wishes to do a leveraged recapitalization. To do this, the company will borrow an additional $60 and combine it with $40 of its cash to pay out a special $100 cash distribution to its shareholders. 

What will happen to the market-value balance sheet and what will the shares be worth?