Dilution


#1

Great announcement on 71milion raise but how do we work out how much our original holding has been diluted from first crowd raise.

As this will determine how much I invest this round

Thanks in advance


(Danny) #2

Looks to me to be about a 30% dilution.


#3

Thanks but does that include all previous raises from 1 st round


( related to Monzo CEO, Investor in Monzo ) #4

no its diluted every time there is a raise - roughly by my calculations the dilution / round has been -
seed round buys 22% of company - 2 m raise company is valued at £9m
Round A - seed investors diluted by 20% - 6m raise company valued at 30m
Round B - seed investors and round A investors further diluted by 10% - 5m raise company valued at 50m
Round C - seed A and B investors further diluted 25% - 22m raise company valued at 87m
Round D - seed A B and C investors further diluted 25% - 71m raise company is now valued at £280m

the seed round now owns 22% x 0.8 x 0.9 x 0.75 x 0.75 (inverse value of dilution rounds) = 8.91% of £ 280m - so £2m initial stake is now “worth” £25m :slight_smile:

  • the really interesting valuation comes at the IPO stage when the company is offered to the public in the future

(Danny) #5

Honestly I wouldn’t get too hung up about the dilution - you’re going to be offered some shares at £2.36. If you think that’s a fair price then buy them!


(Danny) #6

Can’t this be done a simple way?

You bought £10 they are now worth x

£10
£20
£30


(Tristan Thomas) #7

I find this explanation from @tom last time to be a really good way of looking at things:


( related to Monzo CEO, Investor in Monzo ) #8

todays shares are selling at about 2.35 up from £1 last time


(Danny) #9

Yeah but that’s for millions though, I was talking like for us normal people that invested via crowdcube that did between £10 - £100


( related to Monzo CEO, Investor in Monzo ) #10

well if you invested £10 last time to get the same number of shares this time you would have to put in £23.50 :slight_smile:

they are worth whatever somebody is willing to pay for them - which is a different discussion :slight_smile:


#11

just re-read Tom’s post on Dilution and this part has answered my question.

Just change the price to 2.35 and adjust %

For reference, shares in the crowdfunding round were priced at £0.5133. Those shares are valued at £1.0058 in this round. By my calculation, a £1,000 investment last year would buy a 0.0033% share the company. Those same shares are now worth £1,959.48 and represent 0.0023% of the company after dilution. If you wanted to purchase another 0.001% of the company to take your shareholding back up to the original percentage, you should invest £870 in this round.


( related to Monzo CEO, Investor in Monzo ) #12

I bet you’re glad you didn’t sell them now :slight_smile:


#13

Indeed “don’t panic Mr Mannering” comes to mind
Live and learn :blush:


( related to Monzo CEO, Investor in Monzo ) #14

still early days but looking better and better for taking Lloyds over :slight_smile:


#15

Nooooo we don’t want Noel Edmunds as an enemy :joy:


#16

Infact Monzo should be contacting him to join Monzo I am sure he would be happy to support a new bank after his experience with Lloyd’s. Bit of Free PR as well


(Duncan) #17

There was a long discussion about dilution before. The upshot is that as us crowdfunding investors don’t have anything extra associated with our shares (e.g. no board seat that), all crowdfunding investors should treat each round as a completely separate investment, because financially they operate that way. You can see that is true in the handy spreadsheet here.


(knows someone who knows Tom quite well) #18

maybe there should be a community member on the board?


(Edward) #19

You bought £10 they are now worth x

First round: your £10 is now ‘worth’ £45.94 of today’s shares
Second round: your £10 is nor ‘worth’ £22.98 of today’s shares

‘Worth’ in fingerquotes because the valuations so far only mean what Monzo has convinced a VC consortium they are worth for this specific investment round.
By the time you are able to do anything with your shares that results in cash back to you (sell them on the stock market, sell them to someone who wants to buy Monzo outright, etc) the value will have changed. Likely more, possibly (but hopefully not) less. e.g. Monzo currently value themselves at £280million as of the most recent Series D round; if they were to be brought outright by a bank who valued the company as being worth £500million, your first-crowdfunding £10 would be worth £82.04. If they were to float an IPO and ‘the market’ considered Monzo worth £1 billion (by ‘the market’, that means ‘everyone who wants to buy shares considers the company to be worth that much’) your £10 of shares could sell for £164.07.


( related to Monzo CEO, Investor in Monzo ) #20

"Can’t this be done a simple way?
You bought £10 they are now worth x
£10
£20
£30"

series A round you bought shares at £0.5133 (1st crowd funding raise of 1m)
series B round you bought shares at £0.7737 (passion capital fund raise round not open to Monzo customers)
series C round you bought shares at 1.0058 ( 2nd crowd funding round of £2.5m)
series D round - this round shares at £2.35

my prices are similar to Edwards - all depending on rounding up and down figures - but it gives you the amounts that new shares would cost an investor in this round D - i.e. their “worth” at todays price - what investors are now having to pay for the same amount of shares - worth what someone is willing to pay ?