Spiffy

Topics: Stock market, Stock, Preference Pages: 5 (883 words) Published: September 24, 2014

SpiffyTerm. Inc
COMM 486X

Question 1
1a. These Assumptions produce Round 1 Pre Money Valuation of 13.1 Mil and Post Money of 17.1; and round two Pre money Valuation of 36 Mil and Post Money Valuation of 38 Mil. 1b. For the different scenarios, and sensitivity analysis, please see below:

Investment
Pre Money
Post Money
First Round
$4,000,000
$12.7 Mil
$16.7 Mil
Second Round
$3,000,000
$35.0 Mil
$38.0 Mil

First Round
$6,000,000
$12.1 Mil
$18.1 Mil

1c. If Wolf had used the same assumption in the valuation as the founders, he must’ve used a IPO value of $50.6 Mil. 1d. If Wolf used the $1/Share, and $80 Mil valuation, he must’ve used an implicit discount rate of 63.32%. 1e. If we follow the $80 Mil valuation, and 63.32% assumption, but double the amount shares for owners, the investors then should not be paying at $1 per share, but rather $0.50 per share. Wuz should not be an MBA Student. 1f. No, what vulture ventures hope to buy is the Participating Preferred Shares, which act as a loan to the company, at a rate of 8% for interest, which would be paid back in the form of dividends. The remainder amount that was not paid back as dividend, will act as equity and will receive the shares’ equity. Question 2

2a. See the founder’s NPV value according to each founder

Expected NPV
Annabella
$6,366,453
Krishunuvara
$8,001,877
Bob
$6,453,123

2b. See the different valuation based on different expectations below

Round 1
Round 2

Pre Money
Post Money
Pre Money
Post Money
Annabella
$9,955,565
$13,955,565
$40,611,177
$42,611,177
Krishunuvara
$13,633,806
$17,633,806
$45,771,700
$47,771,700
Bob
$10,071,680
$14,071,680
$36,525,565
$38,525,565

2c. According to Gary, founders’ NPV would be $2,361,524.

Round 1
Round 2

Pre Money
Post Money
Pre Money
Post Money
Gary Gloom
$965,393
$4,965,393
$21,305,589
$23,305,589

Question 3
3a.

Krish Model
New CEO Model
Preference

Worth
NPV
Worth
NPV

Krishunuvara
$ 14,262,857

$ 2,176,339.29

$ 10,827,857

$2,011,715.43

Krish Model
Annabella
$ 10,697,143

$ 1,632,254.46

$ 10,827,857

$2,011,715.43

New CEO Model
Bob
$ 10,697,143

$ 1,632,254.46

$ 10,827,857

$2,011,715.43

New CEO Model
VV
$ 28,525,714

$ 4,352,678.57

$ 28,874,286

$5,364,574.49

New CEO Model

3b. Key Assumptions: Allow First Round Price = $1.55, as Leverage to allow to hire new CEO

Krish Model
New CEO Model
Preference

Worth
NPV
Worth
NPV

Krishunuvara
$ 14,262,857

$ 2,176,339.29

$ 12,522,785

$2,326,617.24

New CEO Model
Annabella
$ 10,697,143

$ 1,632,254.46

$ 12,522,785

$2,326,617.24

New CEO Model
Bob
$ 10,697,143

$ 1,632,254.46

$ 12,522,785

$2,326,617.24

New CEO Model
VV
$ 28,525,714

$ 4,352,678.57

$ 21,529,600

$4,000,000.00

Krish Model

3c.No. The board is ultimately elected and controlled by the shareholders. If Krishnuvara controls the board, the other shareholders can still choose to oust that particular board and install one that is more agreeable to their demands. Considering that Vulture, Annabella and Bob control around 70% of the shares, Krishnuvara’s plan would fail.

Question 4
4a. For Series A, they would prefer to not convert at a acquisition value of 5 and 10 mil, and for Series B, they would prefer not to convert at acquisition value of 5, 10 and 20 mil.

Both Convert
Neither Convert
Acquisition Value
A
B
A
B
$ 5,000,000
$ 1,739,130
$ 434,783
$ 3,333,333
$ 1,666,667
$ 10,000,000
$ 3,478,261
$ 869,565
$ 5,280,000
$ 2,640,000
$ 20,000,000
$ 6,956,522
$ 1,739,130
$ 5,280,000
$ 2,640,000
$...
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