Stock: Series B financing

neville

So I own a fair number of shares from a startup I worked at a few years back.
They've been through 2 rounds of funding, one a few months ago where they got quite a bit of funding.
(Series B stock was affected, which is what I have, I believe)

The document I got about it was fairly dense (shocking!). Anyone have any idea what affects this would have on me?

The stock I have was paid for before I left. And the company is still not publically traded. So I'm assuming this is just a notice, but I figured I should check to see if this is something that might actually affect me.

theclam

I'm not an expert by any means, but:

If they issued more stock, then the shares get diluted, meaning that the shares you have are worth less.

If other owners/shareholders sold some of their shares to the new investors, then you're fine.

Either way, the company can get funding, but you'll have to look through the documents to see which it is.

DJ-99

theclam wrote: »

I'm not an expert by any means, but:

If they issued more stock, then the shares get diluted, meaning that the shares you have are worth less.

I believe this would only be true if they gave the newly issued shares away for free, which is unlikely.

Gork

The only way it affects you is in how the market interprets the selling of additional shares. While it could be that the company needs additional funding, it also could be that the company thinks the market has overvalued their shares and they are attempting to make some gains. Regardless, the price of the stock will either go up or down and that's the only way you, personally, are affected.

DJ-99 wrote: »

theclam wrote: »

I'm not an expert by any means, but:

If they issued more stock, then the shares get diluted, meaning that the shares you have are worth less.

I believe this would only be true if they gave the newly issued shares away for free, which is unlikely.

There shouldn't be dilution because the rise in the company's assets should also increase the company's equity, offsetting the new issuance of shares. The basic equation is Number of Shares X Price = Equity. Since the equity will go up with the cash influx, the new issuance of shares should be offset.



And I just reread it and saw "not publicly traded". Whoops.

So ignore the part about the stock price changing due to market factors. The part about no dilution still applies.

DJ-99

Gork wrote: »

The only way it affects you is in how the market interprets the selling of additional shares. While it could be that the company needs additional funding, it also could be that the company thinks the market has overvalued their shares and they are attempting to make some gains. Regardless, the price of the stock will either go up or down and that's the only way you, personally, are affected.

DJ-99 wrote: »

theclam wrote: »

I'm not an expert by any means, but:

If they issued more stock, then the shares get diluted, meaning that the shares you have are worth less.

I believe this would only be true if they gave the newly issued shares away for free, which is unlikely.

There shouldn't be dilution because the rise in the company's assets should also increase the company's equity, offsetting the new issuance of shares. The basic equation is Number of Shares X Price = Equity. Since the equity will go up with the cash influx, the new issuance of shares should be offset.

Yes. You assume they issue the new shares at market price, which means none of the existing shares change in value. If for some reason they issued the shares at less than market price (or for free, in which case there is no increase in equity), there would be dilution of the existing shares, but nobody would sell shares at less than market.