James Caldwell’s Post

Take note. This is important data of Preferred vs. common stock value by stage:

♦️ One of the most important charts for #founders and early-stage #investors, particularly #angel investors. The gap between common and preferred shares is as wide as the Grand Canyon. 🔷 In Chris Harvey ‘s words, "If an investor pays $1.00 for Series Seed Preferred Stock, common stockholders should expect their stock to be worth approximately 22 cents." 🟢 Understanding the #liquidation #waterfall for founders could make all the difference. ✅ If you want to know more about it, feel free to reach out.

'Fair Market Value' fair to whom, and in which market?

Real story: I own shares in a Unicorn - great! But my shares are worthless if the company is being sold for less than $1.7 BILLION. How much are your common shares in a Unicorn really worth? Many of us have common shares in scaleups from investing or being employees. But what are those common shares worth compared to the preferred share classes? The big difference lies in the liquidation preferences. Many of these companies raise later-stage VC funding with "1x liquidation preference". Let's not go into the details (ex. "participating" vs. "non-participating"), but in short, this means that the preference shares will be paid first in an exit scenario. In my example, the company has raised a total of $1.7 billion in VC funding, all with liquidation preferences. So, my common shares are only worth something if the company is sold for a higher amount. In short: Your common shares are MUCH less worth than preference shares. But how much? This is essential information if you want to sell some shares in a secondary transaction or for tax reasons. The statistics from the Carta are, therefore, extremely interesting! • Seed Stage: 77.3% Discount • Series A: 71.7% Discount • Series B: 65.8% Discount • Series C: 63.6% Discount • Series D: 60.8% Discount Measured as the value of the common shares vs. the subscription price of the preference shares #secondaries #shares

This Carta chart needs another look. Of all the charts I have seen the last 6 months, this one is the wildest. (Ed: Peter Walker, thanks for pointing out the language in the subtitle and in my explanation below 🙏) • Discounts per Round: Here are the gaps between the FMV of what a company reports to the IRS (common stock) and what investors actually pay (preferred stock): • Seed Stage: 77.3% Discount • Series A: 71.7% Discount • Series B: 65.8% Discount • Series C: 63.6% Discount • Series D: 60.8% Discount In other words, if an investor pays $1.00 for Series Seed Preferred Stock, common stockholders should expect their stock to be worth ~22 cents. • There's a Big Gap Between 409A Valuations vs. Preferred Stock Prices: The chart shows the fair market value (FMV) of common stock, as determined by the 409A valuation process, expressed as a percentage *OFF* the price of the most recently issued preferred stock in various funding rounds, from Seed through Series D (to IPO, which all preferred stock converts into common). • Which valuation is more accurate? That depends on the purpose - whether this is a new financing, an employee-led tender offer, a secondary sale, an exit, an IPO, or many other scenarios that could impact price. • Decreasing Valuation Gap: The trend lines represent a decreasing valuation gap from Seed to Series D rounds to IPO. The gap tends to shorten as companies mature and progress through each subsequent round of funding. #venturecapital #funds #IPO

#IPOWithMC | Following a sluggish start driven by unfavorable market conditions, the number of IPOs this year has surged significantly in the past couple of months. Here's a look at the top gaining IPO stocks of 2023👇 #IPO #StockMarket #Stocks

2024 Upcoming IPOs 👉 2023 Review: 2023 stands at 2nd place in terms of number and 4th in terms of value 2024 is expecting to see a higher number of IPOs. Let's take a look at a few pointers to understand how the Stock Market performed & what we can expect in the year 2024 w.r.t to IPO listings: 👉 In 2023, the Stock market performed exceedingly well, giving an average return of 19.5% to the investors. While the Nifty jumped 20% in 2023, Sensex saw an amazing growth of 19% to log their best returns since the year 2021 & second best since 2017. 👉 The year 2023 saw a total of ~ 57 IPOs, 2nd highest in the past decade, second only to 2021, which notched 63 IPOs. 👉 As for the total amount raised from IPOs, 2023 ranked as the 4th largest in the past decade. The total amount raised in FY23 is ₹494.2 bn ($5.9 billion), compared to ₹1.2 trillion in 2021, ₹672 bn in 2017, and ₹593 bn in 2022. According to SEBI, over 27 DRHPs have been filed in the year 2023 & many prominent companies are looking to actively list their IPOs on the stock market in 2024. The Funding Winters looks like a distant past as the markets predict a much more resilient performance in 2024, backed by some very strong IPO listings in the second half of 2023. Over 27 Companies plan to raise close to ₹29,000 through public Issue next year. #planify #drhp #sebi #preipo #ipo #iponews #upcomingipo

5 Reasons why I will never buy an IPO. 1. FOMO You buy a stock not because the company executes so well or because you are impressed by the conference calls but simply because so many people tell you it's so exciting. 2. The Bank-Fueled Hype Machine Banks buy the shares of companies that want to IPO and then sell them at the IPO. That means banks pocket the difference if the bank buys for $30 and shares jump 100%. That's why they will do everything to push everyone in the industry to hype stocks before the IPO. 3. Execution! Very important: I want to see how a company executes under the eye of the world for at least a few quarters. Public scrutiny is something else than operating as a private company. 4. The Lock-Up Period After 6 months (usually), the lock-up period expires, so insiders can sell as many shares as they want. Management and early investors often seek to cash out at least a part of their holdings, meaning millions of shares flood the market, often making the stock price drop 5. Price Drops There are very few examples of stocks that never went under their IPO price. PS. IPO: It’s Probably Overpriced

💵📊📈📢 Strong gains by newly listed stocks raise hopes of IPO market revival Interesting article in the Financial Times. Recent large companies that completed an #ipo have outperformed the general market. This is a great sign! We are optimistic that there will be a more robust year in the IPO market. I have posted it about here: https://lnkd.in/gWa-rsVi And here: https://lnkd.in/gnaPQvpy For more about IPOs, please review our Winston & Strawn LLP webinars: - IPO 101: An Overview of the Initial Public Offering Process - The Journey from Private to Public - Can We Talk? Communicating Your IPO - Now You Are Public, What’s Next? - An IPO – The Underwriting Process - Your IPO and D&O Insurance: Managing Risk From Private to Public See all our IPO webinars here: https://lnkd.in/gQUdcS62 #innovation #capitalmarkets Eric Johnson, David Sakowitz, Ben Smolij, Justin Hoffman, Mohammad Hasham, CPA, CA, CMA, Tony Tian, CFA https://lnkd.in/gnZknfAt

🚀 Exploring IPOs: What Happens When You Buy Stocks? 🔍 Ever wondered about the buzz surrounding Initial Public Offerings (IPOs)? Let's demystify it! 📈 When you buy stocks during an IPO, you're getting in on the ground floor of a company's journey to the public market. It's like investing in the next big thing before it becomes big. 🏦 Here's a simplified breakdown: 1️⃣ **The Company Goes Public**: The company decides to raise capital by selling shares to the public for the first time. 2️⃣ **You Place an Order**: You, as an investor, place an order through your broker to buy shares at the IPO price. 3️⃣ **Market Debut**: On the IPO day, the stock starts trading on the open market. Excitement builds, and prices can fluctuate wildly. 4️⃣ **Your Shares**: If your order is filled, congratulations! You now own shares in the company. 5️⃣ **Potential Rewards and Risks**: IPOs can offer fantastic growth potential, but they can also be risky. Do your research! 💡 Tip: Keep an eye on the company's fundamentals, management, and market trends. 🌟 IPOs can be thrilling opportunities, but remember to invest wisely. Knowledge is your best ally in the world of investments! 💼💰 #InvestmentInsights #IPO #StockMarket #InvestWisely