A cap table, short for capitalization table, is a record of the ownership and equity interests in a company. It typically includes the names and ownership percentages of the company’s shareholders, as well as the types and amounts of equity held by each shareholder. The cap table is an important tool for managing the equity of a company and ensuring that ownership is accurately reflected.
There are several key considerations for managing a cap table:
- Accuracy: It is important to ensure that the cap table is accurate and up to date at all times. This includes keeping track of changes in ownership and equity, such as the issuance of new stock or the sale of existing shares.
- Equity allocation: The cap table should reflect the equity allocation of the company, including the percentage of ownership held by each shareholder and the types of equity held.
- Dilution: As a company raises additional capital, the ownership stakes of existing shareholders may be diluted. The cap table should reflect this dilution and help management and shareholders understand the impact on their ownership stakes.
- Liquidity: In some cases, shareholders may want to sell their equity in the company. The cap table can help management understand the potential liquidity of the company’s equity and plan accordingly.
Overall, effectively managing a cap table is important for ensuring the fair and accurate distribution of equity in a company and for making informed decisions about the company’s financing and ownership structure.