Sarah Clemmons and Ben Adamson formed an LLC and named it Best Manufacturing, Inc. in 2012 giving each founder a percentage of the company based upon their respective financial contribution. The LLC had articles of incorporation that authorized 50,000,000 shares of stock. Sarah contributed $750,000 and Ben contributed $500,000 in initial capitalization and issued the respective number of shares of stock to each founder at a price of $1.00 per share to start company operations. The LLC is a private company and its stock does not trade on a public market. Over the next 3 years Best Manufacturing grew to about $1,500,000 in total sales and had grown the staff of 7 employees. Their operation generated about 20% profitability on sales.
Sarah and Ben decided to attract additional investment into the business. They determined that if they could raise another $750,000 initially with a follow-up investment of $2,000,000 the company could easily grow their revenues to $8,000,000 in sales with the added capital investments making their profit 5 times what it is now.
In 2015 Sarah and Ben contracted with a consultant to help find them enough angel investors to contribute the desired $750,000. Start-up Consultants, Inc. found 4 angel investors interested in investing in Best Manufacturing according to the following splits:
Angel Investor 1 - $150,000
Angel Investor 2 - $150,000
Angel Investor 3 - $200,000
Angel Investor 4 - $250,000
Start-up Consultant's Inc. advised Sarah and Ben that the investors would need a 40% interest in the company in exchange for the total investment of $750,000. Sarah and Ben also wanted to set aside a 10% portion of the all issued stock for a company wide stock options plan that could be used for incentivizing employees. The investors agreed to this additional provision.
Sarah and Ben agreed to the terms and the company issued the appropriate new shares of stock.
What was total number of shares of stock issued when Sarah and Ben started the company?
What was the company's initial valuation?
Calculate the pre-money valuation of the company before the investments from the angel investors.
What is the stock share price before the issuance of the additional 1,000,000 shares of stock to the angel investors.
What is the stock share price after the issuance of the additional 1,000,000 shares of stock.
Prepare a capitalization table showing the date, the amount invested, the number of shares of stock issued to each owner, the percentage ownership of the company, and the stock price. Total the table and show the cumulative number of shares issued and a total market capitalization of the company.