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25,000 new shares of preferred stock are to be issued in a down round priced at $1
25,000 new shares of preferred stock are to be issued in a down round priced at $1.25 per share. Before the financing round, there are 100,000 shares of preferred stock outstanding with an original conversion price of $2.50. The original investors have weighted average anti-dilution protection. Using the Conversion Price Formula, what is the conversion price of the original preferred stock after the financing round?
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$2.25/share |
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$2.42/share |
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$2.02/share |
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$1.25/share |
Expert Solution
The correct answer is Option A $2.25
Weighted average after dilution = (New share * price = Old share * Price) / Total Number of share
= (25000* 1.25 + 100000*2.50) / 125000
= 281250 / 125000
= 2.25
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