Why My Thinking On Equity Raises Has Changed

When we were trading at $1.50, we were cautious about raising equity. Now, at $0.60, I’ve had time to reflect, and my perspective on the debt-vs-equity question has shifted. I want to share how, because I think it’s a tension that comes with the territory of running a small public company, and most of the conventional wisdom around it is incomplete.

The Standard Playbook

When you run a public company, the textbook guidance on issuing stock is clear: don’t do it below intrinsic value. Debt is cheaper than equity. Protect your shareholders from dilution. Only issue stock if you’re trading at a premium.

There’s real logic behind this. Dilution is permanent, and selling ownership of your company for less than it’s worth is a real cost to shareholders. For years, that reasoning shaped how we thought about capital at Onfolio.

Over the course of our history as a public company, we’ve had days where the stock pumped and volume was through the roof. Those were real windows, opportunities to raise capital without meaningfully impacting the price. But we were wary of the dilution and still felt the stock was undervalued, so we didn’t do it.

Instead, we leaned toward debt. We spent time negotiating terms, structuring deals, managing interest payments. Or in some cases, we held off on raising anything at all.

What Hindsight Has Taught Me

With the benefit of time and experience, my perspective has shifted in a few key ways.

Stock prices move on their own timeline

We were cautious about $1.50 because we believed the company was worth more. That assessment may have been reasonable, but the market didn’t wait for our thesis to play out. Valuation and timing are two separate problems, and solving for one doesn’t solve the other.

Debt has hidden weight

Everyone says debt is cheaper than equity. On paper, that’s true. But interest payments don’t care if you’re having a bad quarter. They don’t pause when revenue dips or when you need to reinvest. Equity doesn’t come with that monthly obligation. The “cheaper” capital can quietly become the heavier burden.

The time cost is real

Every hour I spent finding debt, negotiating terms, and managing covenants was an hour not spent operating our portfolio companies. That cost never shows up on a balance sheet, but looking back, it’s one of the most significant costs I’ve carried.

Debt puts more pressure on small companies than dilution does

This is the insight I keep returning to. Equity is expensive in theory, but it’s survivable. Debt is cheap on paper, but when things get tight, it’s unforgiving. For small companies especially, the asymmetry between these outcomes matters more than the cost-of-capital math.

Why Be Public If You Don’t Use Your Stock?

This is the question that reshaped my thinking the most.

The whole point of being a public company is access to capital markets. At Onfolio, we were paying all the costs of being public (the Nasdaq listing fees, the compliance overhead, the audits, the quarterly scrutiny) while being cautious about using the one tool that makes it all worthwhile.

None of this means issuing stock without careful thought. There’s a real balance between capitalizing the business and being responsible to shareholders. But I’ve come to believe that being too cautious about dilution carries its own cost — the cost of inaction. And that cost is harder to see because it never appears on a financial statement.

What I’d Do Differently

Think about having the infrastructure in place before you need it. When your stock moves on high volume, you need to be able to evaluate the opportunity quickly. If you’re starting from scratch when the window opens, it’ll likely close before you’re ready.

Recognize that the conventional wisdom is incomplete. “Never issue below intrinsic value” is sound in theory. In practice, the choice is often between issuing at a price you’re not thrilled about and not raising at all. Context matters more than rules.

Capital windows in micro-caps are short. Volume spikes and price movements can be brief. Being prepared to act isn’t reckless. It’s responsible.

Inaction has a cost too. It’s just harder to see.

The Bigger Takeaway

My thinking on this evolved because experience gave me a perspective that the textbook didn’t. The conventional wisdom around dilution isn’t wrong, but it’s incomplete. It doesn’t fully account for the realities of being a micro-cap: the limited options, the brief windows, the compounding weight of debt on a small company.

Everyone says debt is cheaper than equity. That’s true. But I’ve seen debt put more pressure on small companies than dilution ever would.

If you follow Onfolio’s journey or think about these kinds of capital decisions in your own business or investments, I’d genuinely like to hear your perspective. Subscribe to The Onfolio Letter (form below this post) for more behind-the-scenes reflections on running a public holding company.

If you want to see why the compounding math changes when you can acquire at 3x multiples instead of 15x, I put together a free guide on the math of serial acquisition.

And if you’re curious why companies like ours tend to stay invisible to institutional investors, I wrote about that too: The Asset Class Wall Street Ignores.