Oliver founded a new company and the company is currently valued at $10M. He owns half of the equity. There is no debt. You are considering a $1M investment in Olivers company. There are two ways to do this:

i. You buy shares directly from Oliver (i.e. Oliver sells some of his own shares) ii. You participate in the next fundraising round of $5M, i.e., you and other investors will invest a total of $5M at the same time (the firm still has no debt).

How much equity (as a percentage) would you hold under each of these two approaches? Should you prefer the alternative that gives you a higher equity holding? Explain why or why not