You are an adviser to the founder, CEO and sole shareholder of a successful company, AR-Gaming which has developed a business providing Augmented Reality technology solutions to the computer gaming industry. AR-Gaming now needs a fresh injection of $500m of equity capital to fund R&D and geographic expansion.

Additionally, the founder wishes to cash out $50m of value to make other investments and buy a new home.

The CEO provides you with the following data:

He wishes to take $50m out of the business for personal use.

He wishes to remain the controlling shareholder.

Comparable companies EV are 25xEBITDA.

EBITDA is $80m.

AR-Gaming has 200 million issued shares.

The company has debt of $240m.

You believe an IPO is the best solution for your client. Given current market conditions you expect that stock will need to be issued at a 12% discount to value and transaction costs will be 5% of funds raised.

Advise your client in relation to the following:

a) The current Enterprise Value of AR-Gaming?

b) The implied pre-IPO Equity Value and value per share?

c) What percentage of AR-Gaming will need to be sold to raise the required $500m?

d) The percentage of AR-Gaming that the founder needs to sell to raise $50m?

e) If the shares are issued at $1.7 each how many shares are on issue post IPO?

f) What percentage of shares are owned by new investors post IPO?

g) What additional percentage of the company can the founder sell post IPO before he loses absolute control?