What is a Complex Capital Structure?

A business has a complex capital structure when it has issued other types of equity than just common stock. A startup company commonly develops a complex capital structure over time, as it goes through multiple rounds of financing. This is typically done in order to entice additional investors to provide the firm with funding, based on their particular needs. If the business ever goes public, it cleans up this capital structure by converting its various classifications of stock into common stock. When a firm has a complex capital structure and is publicly held, it must report its fully diluted earnings per share.

Example of a Complex Capital Structure

An organization with a complex capital structure issues preferred stock and several classifications of common stock, each one having different voting rights and other privileges. It also issues stock warrants and stock options, as well as several types of callable bonds and convertible bonds.