In a scenario where higher costs lead to an inverse P/E, what is the result?

When higher costs lead to an inverse P/E (Price-to-Earnings ratio), it indicates that the earnings in relation to the price of the share have decreased significantly. This can happen if the costs outweigh the revenue generated by the deal or transaction, leading to a lower profitability. An inverse P/E suggests that the company is generating lower earnings for each share, often indicating financial distress or inefficiency.

In such circumstances, a deal that results in an inverse P/E tends to be dilutive, meaning that the value of existing shares may decrease. This dilution occurs because the new investment generates less earnings per share compared to what existing shareholders were receiving before, due to the increased costs. As a result, shareholders might find that their portion of the company's earnings is reduced, making the investment less attractive and ultimately diminishing shareholder value.

Thus, when costs escalate in a way that adversely affects earnings and leads to an inverse P/E, it marks the deal as dilutive overall.