Your preferred stockholders invested $8mm in your company for 40% ownership of your stock. Their preferred...
Your preferred stockholders invested $8mm in your company for 40% ownership of your stock. Their preferred terms are 1.5x simple liquidation preference with a 3x cap. You sell the company for $75mm. How much money do they get?
Homework Answers
| Invested | 8 | mm | ||
| Ownership portion | 40% | |||
| Valuation | 20 | mm | ||
| Selling the company for 75 mm | ||||
| So preferred stock holders will get | ||||
| Maximum liquidation preference | 24.00 | mm | (3x 8 mm) | |
| And 40% of the remaining (75-24) | 20.40 | mm | ||
| Total | 44.40 | mm | ||
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