Difference between revisions of "Dilution"
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| − | Dilution | + | Dilution is devaluation of shares as a result of emitting new shares to raise money: |
| + | |||
| + | <html> | ||
| + | <img src="/static/files/MBI/Module%2010/dilution.PNG" width=600"> | ||
| + | </html> | ||
| + | |||
| + | As an example imaging the following start situation: | ||
| + | Round A | ||
| + | Share price \$1,00 | ||
| + | {| class="wikitable" | ||
| + | ! | ||
| + | !# Shares | ||
| + | !Percentage of total | ||
| + | |- | ||
| + | |VC | ||
| + | |4.000.000 | ||
| + | |38,1% | ||
| + | |- | ||
| + | |Total | ||
| + | |10.500.000 | ||
| + | | | ||
| + | |- | ||
| + | |} | ||
| + | '''Scenario: "Company does well": Round B''' | ||
| + | Share price \$5,00 | ||
| + | Money to be raised \$20.000.000 | ||
| + | Shares to add to pool 4.000.000 | ||
| + | {| class="wikitable" | ||
| + | ! | ||
| + | !# Shares | ||
| + | !Percentage of total | ||
| + | !Value of shares | ||
| + | |- | ||
| + | |VC | ||
| + | |4.000.000 | ||
| + | |27,6% | ||
| + | |\$20.000.000,00 | ||
| + | |- | ||
| + | |Total shares | ||
| + | |10.500.000 | ||
| + | | | ||
| + | | | ||
| + | |- | ||
| + | |New shares | ||
| + | |4.000.000 | ||
| + | | | ||
| + | | | ||
| + | |- | ||
| + | |New total | ||
| + | |14.500.000 | ||
| + | | | ||
| + | | | ||
| + | |- | ||
| + | |}In this scenario there is some dilution but it is 'profitable'. The VC will be happy. | ||
| + | |||
| + | '''Scenario: "Company does bad": Round B'''' | ||
| + | Share price \$0,10 | ||
| + | Money to be raised \$20.000.000 | ||
| + | Shares to add to pool 200.000.000 | ||
| + | {| class="wikitable" | ||
| + | ! | ||
| + | !# Shares | ||
| + | !Percentage of total | ||
| + | !Value of shares | ||
| + | |- | ||
| + | |VC | ||
| + | |4.000.000 | ||
| + | |1,9% | ||
| + | |\$400.000,00 | ||
| + | |- | ||
| + | |Total shares | ||
| + | |10.500.000 | ||
| + | | | ||
| + | | | ||
| + | |- | ||
| + | |New shares | ||
| + | |200.000.000 | ||
| + | | | ||
| + | | | ||
| + | |- | ||
| + | |New total | ||
| + | |210.500.000 | ||
| + | | | ||
| + | | | ||
| + | |- | ||
| + | |}In this scenario there is huge dilution and not profitable. VC will be unhappy. | ||
| + | |||
[[Category:mbi]] | [[Category:mbi]] | ||
Latest revision as of 19:55, 27 August 2020
Dilution is devaluation of shares as a result of emitting new shares to raise money:
As an example imaging the following start situation: Round A Share price \$1,00
| # Shares | Percentage of total | |
|---|---|---|
| VC | 4.000.000 | 38,1% |
| Total | 10.500.000 |
Scenario: "Company does well": Round B Share price \$5,00 Money to be raised \$20.000.000 Shares to add to pool 4.000.000
| # Shares | Percentage of total | Value of shares | |
|---|---|---|---|
| VC | 4.000.000 | 27,6% | \$20.000.000,00 |
| Total shares | 10.500.000 | ||
| New shares | 4.000.000 | ||
| New total | 14.500.000 |
In this scenario there is some dilution but it is 'profitable'. The VC will be happy.
Scenario: "Company does bad": Round B' Share price \$0,10 Money to be raised \$20.000.000 Shares to add to pool 200.000.000
| # Shares | Percentage of total | Value of shares | |
|---|---|---|---|
| VC | 4.000.000 | 1,9% | \$400.000,00 |
| Total shares | 10.500.000 | ||
| New shares | 200.000.000 | ||
| New total | 210.500.000 |
In this scenario there is huge dilution and not profitable. VC will be unhappy.
