A capitalization table, often referred to as a “cap table,” provides a snapshot of a company’s securities holders at a specific moment.
The level of detail in a cap table can vary based on what information the company chooses to share and what the viewer needs. A basic cap table might display the total number of the company’s issued and outstanding securities, broken down by security type. A more detailed cap table could show the number of securities each stakeholder holds, their percentage of economic ownership, and their percentage of voting control.
Cap tables inform significant company decisions. Therefore, it’s vital for a company to keep its cap table accurate and updated. Companies use cap tables to decide how much equity to award to employees, how much equity to sell to investors, and determine which investors are required to approve major corporate actions. Investors use cap tables to understand their economic ownership and voting control in companies.
During fundraising, a company and its investors use a spreadsheet model, known as a pro forma cap table or “pro forma,” based on the company’s cap table, to forecast how new investments will impact ownership and voting rights. In mergers and acquisitions, a company will create a model, known as a “waterfall,” based on its cap table to determine how to distribute transaction proceeds to its stakeholders.