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Assessing the Economic Value of Venture Capital Contracts - An Option Pricing Approach
Jil Caroline Onimus
Verlag Gabler Verlag, 2011
ISBN 9783834966193 , 153 Seiten
Format PDF, OL
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Geräte
Acknowledgments
6
Contents
9
List of Figures
13
List of Tables
14
1 Introduction
15
1.1 Problem De.nition
15
1.2 Research Objectives
19
1.3 De.nitions
20
1.3.1 General Venture Capital Terms
21
1.3.1.1 Venture Capital Investors
21
1.3.1.2 Venture Capital Financing
22
1.3.1.3 Venture Capital Financing Rounds
24
1.3.1.4 Venture Capital Exit Events
26
1.3.2 Venture Capital Contracting Terms
26
1.3.2.1 Incorporation Documents
26
1.3.2.2 Venture Capital Investment Contracts
27
1.3.2.3 Parties of Venture Capital Transactions
29
1.3.2.4 Financial Instruments
30
1.3.2.5 Price Terms of Venture Capital Transactions
33
1.3.3 Option Pricing Terms
35
1.4 Course of the Investigation
38
2 General Methodology
40
2.1 Screening Methodology
40
2.1.1 Scope of Analysis
40
2.1.2 Model Legal Documents
42
2.1.3 Explanatory Comments
44
2.2 Valuation Methodology
44
2.2.1 Speci.cities of Options Embedded in Venture Capital Contracts
44
2.2.2 Derivation of Risk-Neutrality
47
2.2.3 Choice of the Option Pricing Technique
47
2.3 Model Speci.cation
50
2.3.1 Data Sources
50
2.3.2 Underlying Asset Path
51
2.3.3 Value Process of Embedded Options
60
2.3.4 Dependent Variables
62
2.3.5 Trigger Events
63
2.3.5.1 Pricing Events
63
2.3.5.2 Share Transfers
69
3 Venture Capital Contract Pricing Model
71
3.1 Provisions De.ning the Payoff Functions
71
3.1.1 Mandatory Conversion and Piggyback Registration
72
3.1.2 Liquidation Preference
77
3.1.2.1 No participation
81
3.1.2.2 Full participation
83
3.1.2.3 Capped participation
85
3.1.3 Optional Conversion Rights
87
3.1.4 Interaction of Optional Conversion and Liquidation
89
3.2 Provisions In.uencing the Number of Shares
94
3.2.1 Preemption Rights
95
3.2.2 Anti-dilution Rights
96
3.2.3 Pay-to-play Penalties and Interaction Effects
102
3.3 Provisions Granting Exercise Flexibilities to Preferred Holders
107
3.3.1 Shareholder and Board Voting Rights
107
3.3.1.1 Board Voting Rights
107
3.3.1.2 Stockholder Voting Rights
110
3.3.2 Redemption, Demand Registration and Drag-along
120
3.3.2.1 Redemption Rights
120
3.3.2.2 Demand Registration
122
3.3.2.3 Drag-along Rights
123
3.3.2.4 Synthesis for Initiatory Exit Rights
125
3.4 Synthesis of the Contract Pricing Model
128
3.4.1 Exit Type and Timing
128
3.4.2 Evolution of the Numbers of Shares
129
3.4.3 Combined Payoff Functions
131
4 Application of the Pricing Model
133
4.1 Speci.cation of Contract Terms
133
4.1.1 Speci.cation of Price Terms
133
4.1.2 Speci.cation of Non-price Terms
135
4.1.2.1 Basic Terms
135
4.1.2.2 Negotiable Terms
136
4.2 Speci.cation of Base Scenarios
140
4.3 Simulation Results and Interpretation
140
5 Conclusion
150
5.1 Summary of the Findings
150
5.2 Directions for Further Scienti.c Research
152
A Chi-squared Goodness-of-Fit Tests
154
A.1 Chi-squared Goodness-of-Fit Test Applied to Distribution of Upward Jump Amplitudes
154
A.2 Chi-squared Goodness-of-Fit Test Applied to Distribution of Downward Jump Amplitudes
155
References
157
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