A negative book value means that a company's liabilities are greater than its assets. This indicates a company is possibly insolvent.
There are many potential causes to a firm to have negative book equity. For instance, one potential cause can be accumulated negative retained earnings. Negative book equity can also occur when start-up Page 4 4 firms who do not have substantial tangible assets but rich in patents or new ideas “eat” into their equity.
Negative equity companies are often written off as distressed, but after reporting negative equity, most of them survive for years and have, as a group, outperformed the market 57% of the time.