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If you raise debt for a company, what will happen to the future stock price?

If you raise debt for a company, what will happen to the future stock price?

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Answer #1

Debt is a double edged sword. If a company is debt-free and it intends to raise new debt, investors would expect that the firm has a profitable business opportunity and hence, the stock price would most likely increase post the annoucement.

However for a firm that already has a lot of debt with poor fundamentals, the idea of raising new debt could potentially crash the stock price because investors would be extremely skeptical of management's plan to repay the debt in the future.

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