Checking the Convertible Note Conversion

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We started working through the impact of the preferred stock investment on the cap table by assuming that the note holders would be better off with the valuation cap conversion than the discount conversion, but let’s check.

If the noteholders had converted their $420K at the 20% discount, they would be paying $0.55116 multiplied by $0.80 per share, or $0.44093 per share. And $420K divided by $0.44093 is 952,532 shares.

Converting at the valuation cap generated 1,448,299 shares, so that was clearly the more advantageous conversion option.