Investor Relations

Background: We are a <$50M, privately held C Corp with 70 shareholders. We have 5 layers of capital, with VC money senior preferred. A marketing exercise with bankers showed us that we would not likely get enough via a sale to pay anyone other than the VC's. I.e., shareholders from rounds 1-4 are under water. Question: the financial advisor of one of the shareholders (non-VC) asked for the current value of her client's shares. We have not had a valuation, we have not had a recent capital raise, and we have not recently been sold. So what's the best way to respond? A. No change in value from prior years due to no valuation or other indication; B. No value/under water given current market conditions and the senior preference of the VC's; or C. something else? Thank you.

Answers

Paul Benedetto CFO, Director of Finance, Consultant • July 30, 2015

I've had the pleasure (not) of dealing with a very similar scenario, on several occasions. Unless you want to reference strictly the facts from your last equity raise and how that potentially impacts this particular shareholder's position; I would go with your option A. Speculating on any current market value now could come back to bite you should litigation ever occur.

Anonymous CFO • July 30, 2015

That's helpful. Thanks, Paul.

Phyllis Proffer Owner, Investor Relations Counselor • July 30, 2015

Paul has given you excellent advice.

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