Pre-money / Post-money valuation question
Hey experts.
If a company raises $10mil in debt and $10mil in equity at a pre-money valuation of $100mil, what is the post-money valuation?
My guess is $120mil. Because equity value increases by the amount of cash you raise (regardless of whether it be debt or equity).
Is this correct?
Thanks.
No, it is not correct. You can't create equity value out of thin air by taking on debt.
Post-money valuation in this case would be $110mil.
EV remains unchanged irrespective of funding source.
$10m debt -> cash up, debt up -> EV unchanged $10m equity -> equity up, cash up -> EV unchanged
Post money equity valuation is $10m higher, post money EV is unchanged.
Pre money and post money always just refers to equity value. Doesn't include debt. So post money is 110.
Thanks everyone!
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