High debt means high leverage. Low debt means low leverage. Whatever you are calling "high equity" is just low debt, because (as you said yourself) they have a direct inverse relationship. Unless I'm missing something here...
> If nobody wants your equity then you don't have a lot of room to adjust the ratio.
If literally nobody wants your equity, its price would be 0. I assume you are talking about your equity having a low price instead?
You can still take on debt to buy back shares (or pay a dividend) to lower your outstanding equity. Or you can issue shares to pay back debt.
Or you can use retain profits to pay back debt, lower both the absolute amount of equity and debt.
All of these moves are possible when your share price is low.
So was your comment about "high equity" just about leverage? Like, everyone worries about high leverage but no one seems to care about low leverage (which could be an inefficient capital allocation)? It's just an unorthodox way to put it, that phrase
At most they compare debt to GDP. You almost never hear these panic pieces talk about debt vs equity.
Btw, if people are worried about debt, the first thing we should do is put equity financing on the same footing as debt financing.
As it stands, companies largely service their debt with pre-tax money but pay for their cost of equity with post-tax money.
Bankruptcy just means that the company's old equity is 'deleted' and that what used to be debt gets turned into equity.
Nothing about how the company operates has to change. In principle, workers can still make the same products, customers can still buy those same products etc.
Airlines are the prime example of this: airlines go bankrupt all the time, you could almost say it's part of their business model.
Of course, the process of bankruptcy also often comes with big changes in how the company operates. But you also often see those big changes and turnarounds without any bankruptcy.
(Those big changes can even include shutting the company down.)
By "high equity levels" do you mean high levels of government ownership of corporations? Or do you mean high equity valuations?
If the latter, there are certainly some who voice concerns. For example John Hussman:
I was leaving that a bit ambiguous, because concerns about high debt levels are also often ambiguous about government debt vs private debt.
However the equivalent of government debt is not government ownership in corporations, but people owning equity stakes in governments.
(State owned companies are a problem, but not the problem I wanted to talk about in this comment.)
Yes, there are some people voicing concern about stock prices.
Both debt and equity are just different points on a spectrum that you mix-and-match from to can structure the liabilities side of your balance sheet.
However as the linked article points out, the big difference here is not debt vs equity, but that governments step in with tax payer money to guarantee the value of debt in a way that they don't do for equity.
Those government guarantees are the real deal, whether that's an explicit guarantee or the implicit 'too big too fail'.