1. Analyze Metapath's capital (shareholding) structure before the current series E financing, in particular the various forms and prices of preferred stock from the multiple previous rounds offinancing 2. How has this capital structure affected the offer from Robertson & Stephens? How would RSC's participating preferred interact with the other tranches of preferred stock? 3. HowdoyouanalyzeheRSCoffer Inparticularwhatis thevalueoftheparticipating preferred feature to the RSC syndicate? What are the risks to the Metapath shareholders if the board accepts the RSC offer? 4. HowdoyouanalyzeheRSCoffer Inparticularwhatis thevalueoftheparticipating preferred feature to the RSC syndicate? What are the risks to the Metapath shareholders if the board accepts the RSC offer? Question: Some comments upon the Series A- Dare: . Series A & B: Redeemable Preferred Stock ($1.05/share) Jan 1995 o Debtikecharacteristics o Reflects the investor's uncertainty about early-stage returns and exits o Mandatory redemption: firm has to pay back capital o In this case starting after 5 years and return full within 3 Series C: Convertible Preferred Stock ($1.05/share) Sep 1995 No mandatory redemption Convertibility to common upon liquidation o Demand registration rights more likely . Series D: Convertible Preferred Stock ($1.62/share) Apr 1996 Paid 60% premium from the last round o Paid out before C, which comes before A & B - why? . All Series : o Dividendsaid(albeitatdifferentate$ o Anti-dilution provisions (ADP) Question RSC's offer has considered the following characteristics of the capital structure: . Pricing incentivizes a "cheap sale" All previous rounds were priced significantly lower ($1.05 -$1.62) compared to the current round ($5.50-$6.00), even series C and D Previous investors keen for exit even at a small step-up from round E PCPT needed to protect RSC syndicate (allows for liquidation preference +equity participation) Conflictbetweeneries Series A and B puts pressure on managers for fast IPO because capital will be redeemablendstrainMetapathashflowspost5 years o Series C and D prefer the right price as opposed to timing (remember they are more nd B+ they t if the price