Did you know? 70% of the deals on DealMaker are structured by asking investors to subscribe by number of securities rather than by investment amount.
Calculating the number of securities an investor receives is not always a simple process. A fraction of a dollar in an investment amount may be insignificant, but the impact it has on the exact number of securities issued can cause a lot of confusion for all parties.
What often happens in the traditional capital raising process
- Company sets price per share to $1.50
- Rounding is not considered and investors complete subscription agreements non-digitally with usual investment amounts of round numbers
- Investment amount of $100,000 is completed by subscriber on their subscription agreement for 66.667 shares using standard rounding of above 5 up
- When legal counsel goes to check the math, 66,667 shares cost $100,000.50, and the subscription agreement calculations do not match.
- Although a small amount, the shares are not fully funded and paid for, and this mismatch has a ripple effect on:
- the share ledger
- paid up capital
- Other calculations that will go into legal opinions in the future
- In addition, the investor’s records may not match the company’s records, causing issues down the road in future transactions, or for the investor’s reporting purposes
The DealMaker solution
- DealMaker works with the issuer and legal counsel to set rounding rules prior to launch. The company has the option to round down, round to closest unit, or round up
- Coding the rounding rules into DealMaker eliminates uncertainty to investors
- An investor is shown real time the conversion of their investment amount to the number of securities they will receive, or vice versa, in a variety of currency options
- An issuer can also allocate the dollar amount or number of securities to each investor before the investor starts the questionnaire, eliminating any potential for error, and resulting in a round offering number