Question

Question: 1.You have started a company and are in lucklong dash—a venture capitalist has offered to invest....

1.You have started a company and are in lucklong dash—a venture capitalist has offered to invest. You own 100 % of the company with 4.83million shares. The VC offers $ 1.04million for 820,000 new shares.

a. What is the implied price per? share?

b. What is the? post-money valuation?

c. What fraction of the firm will you own after the? investment?

2. Roundtree Software is going public using an auction IPO. The firm has received the following? bids:

Price? ($)	Number of Shares
14.40	100,000
14.20	280,000
14.00	500,000
13.80	1,300,000
13.60	1,280,000
13.40	840,000
13.20	460,000

Assuming Roundtree would like to sell 2.18 million shares in its? IPO, what will be the winning auction offer? price?

Answer 1

Q 1.)

a) VC offered $1.04 million for 820000 shares.

Therefore, Implied Price =1040000 / 820000 = $1.268

b.) Total number of shares = Previously outstanding + New Issued to VC = 4.83 mn + 820000 = 5.65 mn

Price per Share = $1.268

Post Money Valuation = Price per share x Total number of shares = 1.268 x 5.65 = $7164200

c.) Total Number of shares = 5.65 mn

Shares owned = 4.83 mn

Ownership = Shares owned / Total Number of shares = 4.83 mn / 5.65 mn = 85.49%

Q2.)

First, compute the cumulative total number of shares demanded at or above any given price:

PRICE	CUMULATIVE DEMAND
14.40 14.20 14.00 13.80 13.60 13.40 13.20	100000 380000 880000 2180000 3460000 4300000 4760000

The winning price should be $13.80 because investors have placed orders for a total of 2.18 million shares at a price of $13.80 or higher.