Down-Round Financing: What You Need To Know

The current economic environment has required many startups to seek down-round financing, in which the company has a reduced valuation from its prior financing round. Down rounds have important implications for employees and existing investors and can involve complex structuring concerns. Boards and controlling shareholders must consider any conflicts of interest resulting in litigation from shareholders or creditors negatively impacted by the down round and the risk of shareholder actions in response to such financing.

In this webinar, Scott Peterman analyzes down-round financings from the vantage point of the company and its investors. He discusses the implications of a down round for employees and existing stockholders, board fiduciary and process issues, and technical and structuring considerations.

AGENDA

• Down-round financing and its impact on existing investors
• Board fiduciary duties: mitigating risk of shareholder suits
  • Independent committee
  • Vote of disinterested shareholders
  • Rights offering
• Addressing employees with devalued stock awards and options
• Structuring issues
  • Anti-dilution protections
  • Redemption rights
  • Pay-to-play options