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[Fred93]

Fred has updated his blog again tonite, with an analysis of Prosper's series D equity round.
http://fred93blog.blogspot.com/2010/04/prospercom-series-d-financing-analysis.html

Unfortunately, this update has no pictures  

Here's the meat of the story...

Prior to the series D round, prosper had 14,752,825 shares of common stock outstanding. (This info from page 82 of Prosper's March 31, 2010 SEC form 10k.)

In the series D round, prosper issued 20,340,705 new shares of common stock for $14.7M. That comes to $0.723 per share. (This info from Prosper's April 20, 2010 SEC form 8K.)

The first thing to notice is that prosper was forced to give away 58% of the company to raise this money. That must have hurt.

PS: Nominate for lobby.

[ira01]

Fred has updated his blog again tonite, with an analysis of Prosper's series D equity round.

Unfortunately, this update has no pictures  

Here's the meat of the story...

Prior to the series D round, prosper had 14,752,825 shares of common stock outstanding. (This info from page 82 of Prosper's March 31, 2010 SEC form 10k.)

In the series D round, prosper issued 20,340,705 new shares of common stock for $14.7M. That comes to $0.723 per share. (This info from Prosper's April 20, 2010 SEC form 8K.)

The first thing to notice is that prosper was forced to give away 58% of the company to raise this money. That must have hurt.

PS: Nominate for lobby.

+1 on the Lobby.  But you forgot a link to the blog post.

And wow, talk about your sinking ship -- $14.7M for 20.34M shares, when the original 14.75M shares brought in $40M (and some of those shares weren't even for the cash investments, but were employee compensation). 

Of course, most of the new money was from the old investors, right?  So it doesn't seem accurate to say that Prosper gave away 58% of the company for the new money, since a lot of those shares went to the old owners.  Don't you need to compare each investors old and new ownership percentages to see what they really got for their money?  Maybe you did that in your blog post that I haven't made it to yet without the link.

[Urbi_et_Orbi]

Here's the link.

http://fred93blog.blogspot.com/2010/04/prospercom-series-d-financing-analysis.html

Definitely lobby-worthy.

[Fred93]

Of course, most of the new money was from the old investors, right?  So it doesn't seem accurate to say that Prosper gave away 58% of the company for the new money, since a lot of those shares went to the old owners.  Don't you need to compare each investors old and new ownership percentages

It is true that some owners participated in both old shares and series D.  I don't think we have a breakdown of which investors put in how much money in the series D round.  The 10K contains a list of how much each investor owned prior to the series D round.  

Another way of looking at it: This dilution applies to every share.  So, if you consider the shares owned by Chris Larsen, for example, the fraction of the company those shares represent went down by a little more than a factor of 2.

[Urbi_et_Orbi]

I guess that sort of explains why they were willing to continue to pour money into this hole.

[GLeaderAccountantsChoice]

I guess that sort of explains why they were willing to continue to pour money into this hole.

Are there any preemptive rights?  

[Beerbud1]

Second (2nd) for the Lobby

[VT2VA]

Fred93 - great post.  That is quite a down round. 

One point of clarification regarding the ownership % you reference.  While all preferred shares previously had 1:1 conversion ratios, they have all almost definitely had their conversion ratios adjusted due to the down round.  What we don't know is whether the anti-dilution protection is weighted-average or full ratchet.  It is quite possible that the existing preferred shares have full ratchet (which I've always thought is crazy, but it's common out West).  Therefore, the ownership percentage give-away is probably significantly lower than 58%.

GL - the investors probably had preemptive rights, but the more pertinent issue is whether there are pay to play provisions.  THAT would help explain why the old investors participated in the new round.

[GLeaderAccountantsChoice]

GL - the investors probably had preemptive rights...

I don't know... Are you trying to suggest that they got any of their legal stuff right initially?   

ETA:  This is a joke.  I haven't checked, but I wouldn't be surprised.

[Fred93]

While all preferred shares previously had 1:1 conversion ratios, they have all almost definitely had their conversion ratios adjusted due to the down round.  What we don't know is whether the anti-dilution protection is weighted-average or full ratchet.  It is quite possible that the existing preferred shares have full ratchet (which I've always thought is crazy, but it's common out West).  Therefore, the ownership percentage give-away is probably significantly lower than 58%.

GL - the investors probably had preemptive rights, but the more pertinent issue is whether there are pay to play provisions.  THAT would help explain why the old investors participated in the new round.

Prosper hasn't disclosed the terms of the various preferred rounds.  I agree with you completely that there are many complexities in these terms which could shift the numbers around, including pay-to-play, anti-dilution, warrants, etc.  Even if the earlier guys had full ratchet, it often has a time limit, and may have expired.  I agree there is some uncertainty in the calculation.

A little bit more information will likely be found in the 10Q for the quarter ended June 30.  That may be in our hands in August.

[Investar]

Form D pertaining to this round of funding has posted at the SEC. Who contributed what is not disclosed, of course. Total offering amount was $15,021,612 which was also the amount sold. The odd-lotted $21,000 suggests interest past due on one of the 60-day bridge loans involved was converted to stock in the deal.

Prosper's announcement that the deal amounted to $14,700,000 leaves $321,000 in the breech. Elsewhere Prosper said they retained Allen & Company LLC as placement agent for the Series D funding round and paid a fee of $150,000. Perhaps another $150k was subsequently due? If so, the unaccounted $21,000 remaining might be explained by peel-off of interest due on the second bridge loan, the loan itself having been rolled to stock.

[Gogmagog]

If I wanted to begin some brand new lending venture, it might be nice to simply BUY regulatory approval by acquiring a company who spent the last 5 years doing all the legwork. They might just be keeping Prosper afloat while a buyer is being found. 

I have a feeling that Prosper's lending licenses(state and federal) are what are being paid for.  It seems to be the only reason an investor would keep pumping money into Prosper, especially since their funding level is so low.

[Urbi_et_Orbi]

A new 10-Q filing was made yesterday.

http://sec.gov/Archives/edgar/data/1416265/000141626510000213/0001416265-10-000213-index.htm

The evolving narrative is quite illuminating - and reveals pertinent insights regarding the business plan, growth and long-term prospects for profitability.

[112233]

the "“Larsen Option Agreement"

looks like he provided a small bridge

[Gogmagog]

A lot of words to say, "We hope to get bought by Google".  That seems to be the new DotCom business model instead of going public.