How would RSC’s participating preferred interact with other tranches of preferred stock? The RSC offer of $11. 75 million is more than Metapath has previously raised in all four rounds combined, so RSC is taking on more risk by offering this much funding. Because RSC will be putting up so much cash, RSC is going to want stricter terms to compensate hem for their risk. In addition, Metapath has a high leverage ratio, which adds on to the risk the equity holders are exposed to.
Therefore, RSC is proposing a participating convertible preferred stock instrument which allows them to achieve higher payoffs in the upside while still eliminating their downside risk. The participating preferred terms is necessary according to RSC because if Metapath’s management sells the company after the next round, RSC will receive little more than they put in while earlier shareholders and Metapath management will see very attractive returns on a low cost basis. Additionally, the latest ound of financing (Series D) received the best terms because of the amount of money that was raised. RSC knows that because they are raising even more money than Series D, they should be able to get even better terms than Series D as well. RSC’s participating preferred would not really have any effect on the other tranches of preferred stock except in the case of liquidation.
Because RSC has liquidity preference in the event of a sale, if there is a sale then RSC (Series E) will get paid first. RSC will receive the face value and still have the right to participate in further considerations as if RSC had converted into ommon stock. Series A, B, C, and D will only receive their individual percentage of the value that remains after RSC’s liquidity preference has been paid out. Question 2. RSC offer How do you analyze the RSC offer? In particular, what is the value of the participating preferred feature to the RSC syndicate? What are the risks to the Metapath shareholders if the board accepts the RSC offer?
The Essay on Metapath’s capital structure
... is the value of the participating preferred feature of the RSC syndicate? What are the risks to the Metapath shareholders if the board accepts ... 22% of the company without the participation feature will make Series E holders equally happy, the corresponding price is 0.134/0.22*$6=$3.65 ... dilution, but also by the absolute amount of investments of Series E holders even in the case of future success. ...
Even though the company has only projected its activity one quarter forward, is it possible to assess the reasonableness of the valuation? In order to find the value of the participating preferred feature to the RSC syndicate, we sed the Black-? Scholes formula to find the value of the participating preferred option and the value of just a regular preferred convertible option. We then subtracted the value of the convertible option from the value of the participating preferred option. We believe that the value of the participating preferred feature to RSC is worth approximately $4. 29 million (See Appendix 1).
One of the main risks of the financing proposed by RSC is that this deal would dilute Metapath’s original shares significantly if a sale occurs in the future. If Metapath Software accepts the RSC offer, one of the main risks to the other hareholders is that in the case of liquidation, RSC will have liquidation preference and receive the amount of money the put in as well as 13. 4% of the remaining value of Metapath. However, other shareholders will get less than they would if RSC did not have a participating preferred feature. Also if the RSC offer is accepted, RSC would essentially get to add another person to the Board of Directors. This allows RSC to have even more control beyond their equity stake. Regarding the reasonableness of RSC’s valuation of Metapath, the numbers would be far more reasonable had they looked at more than one forecasted quarter.
However, an accurate forecast for such a volatile small-? cap tech company is hard to come up with, for which the valuation would not be much more accurate had they forecasted more quarters. Given Metapath’s high growth prospects it appears that the valuation is reasonable, but it is hard to confirm its accuracy with the small amount of information provided. 3. CellTech offer Is the CellTech offer reasonable? How should the Metapath board view the CellTech stock?
The Term Paper on Australian Company Report
Group Oral Presentation: the drivers and conditions for the survival and success of an Australian business enterpriseQantas Airways Limited ABN 16 009 661 901 October 2005Fact FileQANTAS AT A GLANCEHISTORY Qantas is the world's second oldest airline. It was founded in the Queensland outback in 1920 andis Australia's largest domestic and international airline. Qantas is also recognised as one of ...
What are the risks for the Metapath shareholders if the board accepts the CellTech offer? CellTech is proposing a strategic merger between CellTech and Metapath nd offering essentially 32% of the merged company to Metapath. From Metapath’s point of view, this is a very attractive offer due to the short-? term liquidity that it would provide, as CellTech is valuing Metapath at 115 million, while RCS only valued them at 76 million. In other words, CellTech is valuing Metapath nearly $25 million more than RSC is valuing the software company.
The Metapath board should understand that because CellTech went public only a couple of months ago, it will be even more difficult to determine how the stock of the merged company will perform in the future. Also, the board should take into ccount the one board member who was an investor in CellTech and has mixed opinions about the company. Even though analysts seem to be bullish on CellTech stock, the Metapath board members need to take the reports with a grain of salt. According to Hansen and his board, CellTech’s growth prospects are much lower and more uncertain than Metapath’s, so CellTech believing Metapath is only worth around 30% of their total capitalization should not seem justifiable to Hansen. If the board accepts CellTech’s offer, one of the biggest risks for the shareholders is that CellTech’s stock could tank and they could ultimately end p with stock that is worth basically nothing.
Additionally, all of the CellTech’s stock would be worth the same. So the investors in Series D will probably be pretty angry that they have the same stock as Series A, B, and C. Lastly even though the CellTech deal itself will not dilute shareholders ownership, the Metapath shareholders will no longer be protected from dilution after the deal happens. CellTech could engage in other actions that would dilute shareholders ownership.
Therefore, although the offer appears reasonable at first given how much short-? term liquidity it would provide, Metapath would be resigning ontrol of the company to CellTech and diminishing its long-? term growth prospects. Despite the $25 million more that Metapath would get now, it sacrifices too much by accepting it to deem it reasonable. However, the lack of information with which the valuation of the company was done makes it hard to assess the legitimacy of the quantitative back-? up. Question 4. Conclusion If you were on the Metapath board, which option would you support?
The Essay on Shares and Joint Stock Companies in the New Economic Model
Introduction Good morning, dear colleagues. I’m glad to see everyone here. Thank you for your coming. Let me start by introducing myself. My name is Elena Torlopova. I’m a freshman of the State University of the Ministry of Finance of the Russian Federation. I study at the department of the international economic relations. My aim for today’s presentation is to give you information about Shares ...
If we were in the Metapath board we would support the RSC offer. As shown by the diagram depicted in the following page, the CellTech offer is riskier, which increases the downside or investors. On one hand, the CellTech offer would provide short-? term liquidity, something very attractive to Metapath at this point, as it is quickly utilizing all of its cash to grow. However, it takes away the control of the company, the large growth prospects, and exposes Metapath to the risk of the merged company’s stock tanking. There is no guarantee that CellTech’s stock will keep growing, and while the RSC offer provides less short-? term liquidity, it makes more sense long-? term. 2 CellTech Pros -Well-priced, short term liquidity (of 115M as opposed to the 76M offered by RSC).
– Operational benefits:
CellTech already has established sales and marketing infrastructure. ] – CellTech’s engineers could be useful to Metapath’s development group. – A&B investors would gain a higher return than C&D investors because of the extra common stock shares of the initial investment terms (only if stock doesn’t tank).
CellTech Cons – Cell Tech’s stock could tank after the merger. – Metapath would no longer be an independent company, which would lower its growth potential.
The seniority of the diferent financing rounds would disappear (A&B hurt).
– Questionable prospects: weak past performance, as shown by their income tatement and short public record. – Only offering 30% of total capitalization despite growth prospects. RSC Pros – Metapath gets to remain an independent company, maintain growth prospects. – Anti dillution clauses for A-D still intact in the event of an IPO.
The Essay on The terms offer and acceptance
1. The terms offer and acceptance are terms most commonly found in contact law. An offer makes up the first part of a contract, it is imperative that the offer is definite. The term offer is defined by Treitel as: ‘…an expression of willingness to contract on specified terms, made with the intention that it is to become binding as soon as it is accepted by the person to whom it is ...
