Reading Cap Tables

Reading Cap Tables

May 13, 2021 by investor

The cap table stands for capitalization table and tracks the equity ownership in a company.

It’s important to be able to read a cap table and understand what it says.

The key terms to know include the following:

– Pre-money – the value of the shares before the investment.
– Post-money – the value of the shares after the investment.
– Price per share – the post-money valuation divided by the total number of shares.
– Common stock – basic ownership share in a company.
– Preferred stock – a stock with special rights and privileges.
– Convertible preferred stock – preferred stock that can convert to common stock.
– Participating preferred – preferred stock with a liquidation preference.
– Stock options – the right to buy a specific number of shares at a specified price.
– Warrants – the right to buy stock at a specific price.
– Restricted stock –  stock used instead of options for tax purposes.
– Authorized shares – total number of shares the company has authorized for present and future use.
– Outstanding shares – total number of shares that have been issued.
– Fully diluted shares – total number of shares including all warrants, options, and restricted stock exercised.

It’s important to know these terms so you understand what the ownership stake means.

 

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