Notes

How To Use The Pro-Forma Cap Table
A pro forma cap table, also referred to as a free-forma cap table, is a financial spreadsheet that presents the ownership structure of an organization in graph form. Investors can view the information on a pro forma cap table in real or virtual format. These types of financial spreadsheets have become very popular in recent years. Investors often use these types of spreadsheets to track the investments of various companies. In addition, pro forma cap tables are commonly used by mutual fund investors to compare investment options of various companies.

Investors will commonly buy or sell shares of a company during a financing round. During a financing round, investors will offer shares of stock for a set price and the shares are sold for a predetermined number of days or weeks at a predetermined price. The amount of money an investor purchases during a round is referred to as the offering price. Investors who purchase shares will most likely be required to pay capital gains tax at the current market price on the shares of stock purchased. This is where the pro forma cap table can help.

An investor will purchase shares of stock from the issuing company during a financing round. After the investor purchases these shares they will report the purchase as a sale on their personal financial statement. The proceeds from the sale are typically used to make capital purchases of shares of stock. Most professional investors use the pro forma cap table to determine if a particular share of stock is worth more than another share based on its current value and potential for appreciation in the future.

Free-forma share cap tables are usually used by investors who buy shares of stock in companies that are relatively well known and/or have a strong history of trading. The pro forma cap table provides investors with the information they need to make an informed decision when purchasing shares of stock. These Excel spreadsheets will usually include the following information: name of the publicly traded company; date of initial public offering (or IPO); start cost; end cost; per share cost; dividend yield; beta; price per share (PPI) for the first six months of pricing history; and PEG ratio, which is the annualized percentage increase of price in comparison to the book value of shares. The investor can then determine if the price of the stock is under or over the book value.

When the investor purchases shares of stock, they will be taxed on them. The pro forma cap table can be used to compare shares of a company with each other and with the existing publicly traded stocks to determine if the new purchase will be tax exempt. Some investors may be eligible to exclude up to 100% of their purchase price for tax purposes. Others may not be eligible at all.

Investors will find it helpful to determine their risk tolerance before investing in any publicly traded security. Diversification across asset classes will help investors to eliminate risks that they may not be comfortable with. Diversification across the board can also help determine their portfolio size. If there are only a few investments that an investor wants to trade in, the investor can use the pro forma cap table to compare those shares against each other. This will help the investor decide how much to buy and how many shares to buy at any given time.

The pro forma cap table can also be used by startups. For startup s, it is important to identify potentials growth opportunities as early as possible. Identifying these growth opportunities sooner rather than later will ensure that the startup can raise funds from private investors as quickly as possible. Once these funds are raised, the business will be well on its way to becoming a viable venture.

Investors must determine the amount of shares that they want to issue and how many they need to purchase. Once this decision has been made, they can use the pro forma capitalization table to compare all the securities that are equivalent in terms of their strike prices, shares price per share (PSPS) and dividends per share (DPSS). Once this is determined, they can select the shares that are suitable for purchase on the open market. The downside to this system is that it does not allow investors to easily select top value stocks. It is recommended to only use the pro forma cap table for penny shares and higher priced common stocks.
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