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APEX INVESTMENT Case Solution & Answer

APEX INVESTMENT Case Solution 

Introduction

Access-line Technologies is a competitive firm in the industry. Company have enough potential to provide exceptional telecommunication services. Access-line is rapidly growing through developing partnership with several business partners. In this case we are supposed to decide based on our calculations if Apex investment should invest in Access-line. Further we will answer the questions accordingly.

Question 1

If warrants are not exercised then for series A new shares will not be issued to new investors and same goes for series B. The shares percentage allocation for existing shareholders has been changed. In series A the existing shareholders would get 78.72% shares and management and employees shares would be 21.28%.  For series B existing investor’s shares percentage would be 62.74% and for management & employees it would be 20.03%. The market capital in series A for existing investors would be $55,517,420 and for management and employees it would be $15,006,922. Now in case of series B market capital for existing investors is $64,688,792 and for management and employees it would be $20,656,379. So we can say that if warrants are not exercised then no preferred stocks will be issues in each series and the percentage allocation of shares will fluctuate further refer Appendix 1. The Partial valuation equations are as follows:

For series A: 7931060X+2143846Y

For Series B: 8086099X+2220726Y+2582047Z

Question 2

In case if warrants are exercised then the scenarios will change the preferred stocks will be issued to new investors for both series A and series B 2220726 and 2000000 respectively. New investors will get 18.06% of shares for series A and for series B it would receive 13.43%. Now the existing investors’ percentage will be 64.50% and for management& employees it would be 17.44%in series A. and for series B the existing investors will receive 54.315 of shares and management and employees will receive 17.34% of shares. The structure of market capital will also change for both series. The market capital for existing investors would be $55,517,420, for new investors it would be $15,545,082 and for management and employees it would be $15,006,922 in series A. For series B market capital of existing investors $64,688,792, for new investors of series Ait would be $17,765,808, new investors of series B it would be $16,000,000 and for management and employees it would be 20,656,376 Further refer Appendix 2. The Partial valuation equations are as follows:

For Series A: 7931060X+2220726Y+2143846Z

For series B: 8086099W+2220726X+200000Y+2582047Z

Question 3

If warrants are exercised then the minimum exit proceeds would be $49,310,890. The preferred stock for series A $15,545,082, New Investors series A preferred stock would be $17,765,808 and series B new investors preferred stock would be  $16,000,000 further refer appendix 3.

Question 4

At optimal warrant exercise the exit proceeds would be in total $36,164,880. For New investors of series A Preferred Stock $17,500,000, for new investors for series A would be $2,664,880, and for new investors of Series B it would be $16,000,000 further refer appendix 4.The Partial valuation equations are as follows:

For Series A: 7931060X+2500000Y+2143846Z

For Series B: 8086099W+333110X+2000000Y+2582047Z

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