What is likely to happen to equity investors in a company undergoing a restructuring?

In the context of a company undergoing restructuring, equity investors are often at a higher risk compared to other stakeholders, such as creditors and debtholders. When a company restructures, it typically means that it is facing financial difficulties and is looking for ways to reorganize its operations, reduce debts, and stabilize its financial position.

Investors who hold equity in the company, also known as shareholders, may indeed lose their entire investment. This risk arises because equity ranks lower in priority compared to secured and unsecured creditors during a restructuring process. If the company's debts exceed its assets, the equity holders are last in line to receive any compensation. In many cases, the restructuring may lead to the dilution of existing equity or the complete cancellation of shares, especially for those who are not involved in the new financing or restructuring plan.

The other choices present scenarios that are less likely during a restructuring. Full compensation for investments (first choice) is uncommon, as restructuring usually implies a significant financial issue. Gaining additional shares (third choice) may occur under certain conditions but is not guaranteed for all shareholders. Finally, equity holders do not have priority over all creditors (fourth choice); in fact, they are often paid last after all other debts have been settled.

This understanding