Ok hot shots, calculate the correct fully-diluted conversion price for these Convertible Promissory Notes
To set the stage, there has been some discussion about the language in the conversion price clause under the valuation cap for a series of Convertible Promissory Notes. The definitions in the Notes specify that the fully-diluted capitalization *includes* the conversion shares from the Notes whereas typically the conversion shares are *excluded*. So assume the following
Principal plus accrued interest: $1,100,000
All common, options, future options: 15 million shares
Valuation cap: $5,000,000
What is the conversion price here and what would it be if the language specified the conversion shares were *excluded*?.
Update: yes, we have already calculated the amount and even have a BigLaw partner on the matter, but it's the different interpretations I am interested in and want to see what the consensus is.
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STFU
You tell us your answers and we'll say which one we agree with.
no lol
This kid really posted his homework on here.
Please never post again bro. You'll never amount to anything if you can't even figure this out
This is cut and dry
I don't understand this but want to know. Can anyone post the answer if they know it instead of bashing OP? That's what this site is for anyway, let's help each other out...
Curious to hear the answer... But I'll take a stab. Isn't it impossible to tell what the conversion price will be? The notes either convert at a maturity date at the valuation cap ($0.33 per share), or if an equity financing event occurs at a pre or post valuation above the valuation cap. If that occurs, then the conversion price would be the share price from the equity round discounted by the valuation cap over the equity round valuation (pre or post). If the convertible shares offer conversion at a discount to the equity valuation then you simply take the maximum of the formula i just calculated, or the equity round share price multiplied by the discount.
Example: No equity round, notes mature = $0.33 share price conversion = $1.1M / $0.33 = 3.33M shares converted
If $1M equity round at assumed $10M post valuation = $0.60/share. Conversion price = $0.60 * ($5M Cap / $10M Post) = $0.30 Conversion Price = 3.67M Shares converted
My math may be way off... but at least I tried!
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