Capitalization Table

A capitalization table, also known as a cap table, is a table that summarizes the equity ownership of a company. It shows the number of shares issued and outstanding, the par value of each share, and the percentage of ownership held by each shareholder.

The capitalization table is an important tool for investors and shareholders because it provides information about the company's capital structure and how the equity is distributed. It can be used to track changes in ownership over time, and to identify potential conflicts of interest.

The capitalization table is typically prepared by the company's legal counsel or investment banker. It is usually included in the company's prospectus or offering memorandum, and it is also filed with the Securities and Exchange Commission (SEC) as part of the company's registration statement.

The capitalization table is a valuable tool for understanding a company's financial structure. It can be used to assess the company's risk profile, and to identify potential areas of concern. By understanding the capitalization table, investors can make more informed decisions about whether or not to invest in a company.

Here is an example of a capitalization table:

| Shareholder | Number of Shares | Par Value | Percentage of Ownership |
|---|---|---|---|
| Founder A | 100,000 shares | $1 per share | 20% |
| Founder B | 100,000 shares | $1 per share | 20% |
| Venture Capital Firm | 200,000 shares | $1 per share | 40% |
| Public Shareholders | 50,000 shares | $1 per share | 20% |

In this example, the company has a total of 450,000 shares outstanding. The founder shareholders own 40% of the company, the venture capital firm owns 40%, and the public shareholders own 20%.

The capitalization table is a dynamic document that can change over time as the company issues new shares or repurchases existing shares. It is important to keep the capitalization table up-to-date so that investors have a current view of the company's ownership structure.