Jan 14, 2015 exposure draft of book has two new chapters

A new exposure draft of my book-in-progress is available in the Resources section. Two new chapters have been added, bringing the total to six. Chapter five will be of particular interest because it describes five types of companies that may adopt the Fairshare Model and illustrates scenarios for Performance Stock conversion.

I am grateful to those who comment on my book-in-progress. This crowdvetting process is very helpful to me on many levels.

Karl

 

What is the Problem with a Conventional Capital Structure?

Under the Resources tab is new draft material from my book-in-progress about the Fairshare Model.
There are three chapters for you to contemplate and respond to (I hope).
Chapter four, in particular will be of interest to anyone with securities expertise.

The Fundamental Problem: Valuation
Praise aside, a conventional capital structure has a fundamental problem, an Achilles’ heel. At the time of an equity financing, it requires the issuer and investors to set a value for future performance. For venture stage companies, this is hard to do in a rational manner.

You can test this assertion even if you are a novice about capital structures and valuation. When you meet someone who raised money for a company or who has invested in one, ask “What was the valuation?” Follow that question with “Why did that make sense?”

Chances are that you will see uncertainty and anxiety play across their face. Why? It could be that they don’t know what the valuation is. Perhaps, they know the number but not how to calculate it. Most certainly, they don’t know how to evaluate it, or, they are not confident that it makes sense.