Your investment banker calls you and says that if the angel investors and venture capitalists were to exit the company completely at the IPO stage, he may only be able to get the IPO priced at a modest multiple of 20 rather than 28 since capital markets typically interpret such news negatively. In addition, he says that if the angel investors and venture capitalists were to exit the company completely at the IPO stage, the forecasted earnings have to be brought down to $6.0 million instead of $7.5 million for 2020 since the company receives fewer proceeds from the IPO. Assuming that you may be able to talk your angel and venture capital investors into either staying beyond the IPO stage or exiting at the IPO stage, would you prefer that they exit or that they stay? Why?

Circle one of the responses You would prefer if: Angel/VCs exit Angel/VCs stay

Calculations and explanation: