Jones, the investor, proposes taking participating preferred stock1 with 1x liquidation preference in return for her $5
Question:
Jones, the investor, proposes taking participating preferred stock1 with 1x liquidation preference in return for her $5 million investment. Draw the payoff diagram for this security from Jones’ perspective, assuming she invests $5 million at a pre-money valuation of $14.75 million with no option pool.
What is her cash-on-cash return (money received divided by investment) if NewVenture exits in December 2020 at a $150 million valuation?
Thompson, the founder, provides a counter-proposal in which the security will be a standard convertible preferred stock with a liquidation of 2X. Draw the payoff diagram for this security from Jones’ perspective.
If NewVenture exits in December 2020 at a $150 million valuation what would be Jones payoff? which type of a security would Jones prefer? Why?
At what company valuation would the two securities have an equal payout?
Systems analysis and design
ISBN: 978-0136089162
8th Edition
Authors: kenneth e. kendall, julie e. kendall