Capital Raising and Conversion Example for DIG
CAPITAL RAISING
Worked example of conversion of notes
Illustrative assumptions for worked example
Item
Valuation Cap
Shares outstanding
Assumption
$37 million (most recent company valuation)
353,169,368
Pre-IPO primary raise
$5 million
8% p.a.
Pre-IPO interest
Pre-IPO discount to IPO price 25% until [30 June 2023], 30% thereafter
IPO primary raise
IPO equity valuation
Market cap on listing
IPO date
$7 million
$60 million (prior to primary proceeds)
$67 million
Exactly 365 days after completion of the pre-IPO round
Summary share capital table at IPO
Investor Group
% ownership
(at IPO price)
78.2%
Shares owned
$ ownership
(at IPO price)
Existing shareholders
353,169,368
52,358,491
Noteholders
51,543,637
7,641,509
11.4%
Sub-total-prior to IPO
404,713,005
A$60.0M
IPO investors
47,216,517
A$7.0M
Total
451,929,522
A$67.0M
89.6%
10.4%
100.0%
Worked example explanation
For the purposes of this example, we have made a number of illustrative assumptions, as
shown in the table on the left.
Based on these assumptions, at the time of the IPO, the Notes would accrue interest equal to
$400,000 (8% x $5 million x1 year), resulting in a total outstanding Notes position of
$5,400,000. The Notes would convert immediately prior to the allotment of new shares issued
under the IPO (i.e. 1 millisecond prior to allotment).
The capped conversion price would be determined by dividing the Valuation Cap of $37
million by the number of shares on issue immediately prior to the conversion of the Notes (i.e.
353,169,368 in this example).
Capped conversion price = $37 million / 353,169,368 = $0.10¹
Shares issued to noteholders = $5,400,000 / $0.10 = 51,543,637
This results in 404,713,005 (51,543,637 + 353,169,368) shares being on issue
immediately following the conversion of the Notes.
In the usual fashion, the IPO price would be calculated as the equity value prior to
contribution of IPO primary proceeds, divided by the shares outstanding prior to the issue of
new shares under the IPO.
IPO price = $60 million / 404,713,005 = $0.15'
Shares issued to IPO investors = $7 million/A$0.15 = 47,216,517
The capped conversion price represents a 36% discount to the IPO price, so therefore
governs (when compared to the minimum 25-30% discount on the Notes)
In this scenario, the noteholders would achieve an IRR of 53% on their pre-IPO investment
based on the uplift in value from $5 million at the pre-IPO to $7.64M at the IPO (based on the 1
year hold period). The following page outlines some sensitivities to the IRR achievable by
investors under this worked example.
dig
Note: This worked example is a simplification of a potential outcome for pre-IPO investors in DIG. All data expressed as SA, unless specifically stated otherwise.
1. Figure rounded to 2 decimal points.
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