Metapath Case Essay

Metapath was a hi-tech company providing software products for wireless carriers. It had a revenue of 22 one thousand thousand and was e get together as the premier company in its market space. The net goal of the founder, Hansen, was to see the Metapath go IPO in both years. However, this company confronted two main obstacles for that goal concentrated customers and fluctuant quarterly revenues. To expand his blood and also solve these problems, Hansen need to again raise more money. alike most of the software companies, Metapath demands continuously money supply during the premature current of its life. The main financial strategy of Metaph was to raise several rounds of money by turning to venture capital investors get money from them in win over for Metapaths preferred filiation and a promise to redeem or convert to commom stock in event of IPO. It had raised $ 9 gazillion in quad rounds of financing before 1997, in which STI and Bessemer participated in the jump two r ounds. Unlike the following standard convertible preferred stock instruments, these first two rounds had a structure called straight redeemable, cheap general, which required a principal payment in the future, making the two classes of preferred stock more like debts.Therefore, by paying periodic (or quarterly) dividends and guarantying the safety of principle apprise to venture investors, Metapath raised its first four rounds of capital. Selling the company to CellTech could bring Metapath many goods. First, CellTech offered an attractive price $cxv one thousand million, relatively large for a premature company with revenue of 25.6 million and negative income -$1.9 million. Second, it was already an public company, which prevented the dilution of possible further financings. Third, by merging with CellTech, Metapath could achieve synergy from expertise of CellTechs engineers, and the fully-formed marketing and domestic gross revenue organization. However, since the merging was plan to be in stock exchange and CellTech had deceased public that few months, information could be limited to value its stock price fairly.Also in the big environment of youthful 1990s, too much investments in high-tech companies made this industry overheated, and CellTech could be overvalued by analysts. For the VC option RSC offered, one big advantage was that the immediate property flow of $11.75 million, which would be very helpful for Metapaths operation. Another advantage was that it bought time for Metapath to initiate an independent IPO in the future, which had potential to cost more than CallTech offered. But it brought concerns to Metapath as well. RSC brought up the strike term called alive(p) convertible preferred stock, at which holder could not only convert from the preferred stock, but also in the event of sale, see face value and participate in further consideration of vulgar stock. This term could make a sale of Metapath extremely dilutive to the found ers.