EBV made a $6M Series A investment in Newco. EBV's investment is structured as 10M shares...

  

Transcribed Image Text:

EBV made a $6M Series A investment in Newco. EBV's investment is structured as 10M shares of convertible preferred stock (CP). The founder and the employees of Newco have claims on 10M shares of common stock. The $100M EBV fund has annual fees of 2 percent for each of its 10 years of life and earns 20 percent carried interest on all profits with committed capital as base. Expected GVM is 2.5. As the value of Newco grows, Talltree is considering $12M Series B investment in Newco. Talltree proposes to structure the investment as 10M shares of convertible preferred stock (CP). The $250M Talltree fund has annual fees of 2 percent for each of its 10 years of life and earns 20 percent carried interest on all profits with committed capital as base. GP% = 10%. Due to unexpected events Newco is liquidated at $12M. Which of the following statement is True? O Talltree will take all $12M. $12M will be divided to tree parties (founder, series A investor and series B investor) based on the ownership fraction. O EBV will take $6M and Tall tree will take $6M. EBV made a $6M Series A investment in Newco. EBV's investment is structured as 10M shares of convertible preferred stock (CP). The founder and the employees of Newco have claims on 10M shares of common stock. The $100M EBV fund has annual fees of 2 percent for each of its 10 years of life and earns 20 percent carried interest on all profits with committed capital as base. Expected GVM is 2.5. As the value of Newco grows, Talltree is considering $12M Series B investment in Newco. Talltree proposes to structure the investment as 10M shares of convertible preferred stock (CP). The $250M Talltree fund has annual fees of 2 percent for each of its 10 years of life and earns 20 percent carried interest on all profits with committed capital as base. GP% = 10%. Due to unexpected events Newco is liquidated at $12M. Which of the following statement is True? O Talltree will take all $12M. $12M will be divided to tree parties (founder, series A investor and series B investor) based on the ownership fraction. O EBV will take $6M and Tall tree will take $6M.

Answer rating: 100% (QA)

Based on the information provided the correct statement is 12M will be divide... View the full answer