Standard Terms in Non-Public Financing Transactions (S-Z)
The following concludes this list of some of the standard terms that are used in financing transactions for start-up and other pre-IPO ventures. Also see Standard Terms in Non-Public Financing Transactions (A-F) and Standard Terms in Non-Public Financing Transactions (G-R).
| S-3 Registration | A simplified form of registration statement that may be used by certain companies that already are reporting companies. |
| SEC | The Securities and Exchange Commission, the primary federal securities regulatory agency. |
| Securities Act of 1933 | A federal securities law that governs, among many other matters, the manner in which companies may sell shares of their stock or other securities. |
| Securities Exchange Act of 1934 | A federal securities law that governs, among many other matters, the on-going reporting obligations of public companies and their shareholders. |
| Stock Option | A right to purchase stock at a pre-determined price over a given period of time. (See also “Warrants”). |
| Underwriter | A person who or entity which acquires stock or other securities for resale in a public offering, or serves as an agent to a company to assist that company in selling and distributing stock in a public offering. |
| Valuation | A term which describes the value of a company for the purpose of determining the purchase price the investor will pay for his, her or its investment in the company. “Pre-money” valuation refers to the company’s purported value without regard to the investment, and “post-money” valuation refers to the value of the company after the investor makes the investment. Because there is usually no market for shares of start-up or other pre-IPO ventures, valuation of these companies is often determined through estimates prepared by the company and its advisors or through negotiations with investors. |
| Venture Capital Investor | Professional investors, usually consisting of managed funds that specialize in investing in start-up and other pre-IPO companies. |
| Vested – Unvested | Commonly applied to both stock and to stock options, these terms denote the acquisition of rights in stock over time or upon the occurrence of certain events. Stock which is “unvested” is generally subject to a right of the company to repurchase it at a nominal price. Options which are unvested usually may not be exercised or, if they can be exercised, the stock that may be acquired is subject to a similar repurchase right. “Vested” stock normally may not be repurchased or may only be repurchased at fair market value. Many compensatory stock arrangements with key employees, directors and consultants provide that stock or options are unvested as of the date granted and that the stock or options become vested over time or when certain events occur. This is used as an incentive to attract and retain key personnel. |
| Voting Rights | A right of a class of stock to vote in elections of directors and other matters submitted to the shareholders for their vote or consent. |
| Warrants | A right to purchase stock in the future at a pre-determined price. For start-up companies, warrants are generally issued to outside investors in connection with financing transactions, whereas options are granted to service providers such as employees. |
| Weighted Average Anti-Dilution Provision | A statement in the rights of the holders of convertible preferred stock or warrants that adjusts the conversion ratio (and entitles the holder to more shares of common stock upon conversion) if shares are issued at a lower price in the future in accordance with a mathematical formula that takes into account the number of shares issued and the payment made for the shares. In comparison to ratchet anti-dilution provisions, weighted average anti-dilution provisions are more favorable to the issuer and the holders of common stock. |