How is the percentage of shares of common stock to be issued in a transaction calculated?
The percentage of shares of common stock to be issued in a transaction is calculated using the following formula: Maximum Potential Issuance of Shares of Common Stock Pre-transaction Issued and Outstanding Shares of Common Stock To correctly calculate the percentage of shares to be issued, the numerator of this equation must contain all securities initially issued or potentially issuable or potentially exercisable or convertible into shares or common stock as a result of the transaction (e.g., earn-out clauses, penalty provisions, equity compensation awards assumed or in assumed plans, etc.). To correctly determine the denominator, the company should use only issued and outstanding shares. If the company has multiple classes of common stock, all shares should be added together. However, the denominator should not assume the conversion or exercise of any options, warrants, or other convertible securities.
