Tracking equity ownership and anticipating its effect on Net Asset Value (NAV) remains a significant challenge for asset managers operating in illiquid markets. Cap Tables evolve rapidly, particularly in deals involving convertible instruments, complex financing structures, or liquidation preferences.
To support fund CFOs and investment teams, ScaleX Invest now offers a suite of features designed to help users monitor shareholder structures and model dilution impacts with greater precision. These tools strengthen the accuracy of periodic valuations and enable more robust scenario analysis.
Why Accurate Cap Table Management Matters
By nature, a Cap Table is never static. It evolves with each funding round, secondary transaction, or conversion event. Yet many funds still rely on manually updated spreadsheets, which are ill-suited to the growing complexity of equity structures.
NAV calculations are directly influenced by how ownership is modelled. Misrepresenting fully-diluted or non-fully diluted positions can lead to incorrect valuations, affecting reinvestment decisions, LP reporting, and audit readiness.
Dilution can also unfold gradually and non-linearly. Instruments such as warrants, employee options, or convertible debt can lead to significant shifts in ownership, often becoming visible only at the time of conversion.
In this context, monitoring and projecting dilution over time becomes a requirement.
Cap Table Features on ScaleX: Track Funding Events and Ownership Changes
ScaleX enables users to import Cap Tables, centralising historical financing data and visualising changes in ownership over time. Each round can be reconstructed with key terms including share price, pre-money valuation, option pool allocation, and more.
Once imported, ownership is automatically calculated on both fully-diluted and non-fully diluted bases. This helps users assess differences between economic and voting rights, and estimate the potential impact on NAV.
Users can also simulate upcoming events, such as new funding rounds or the conversion of debt into equity, and measure their effects on the fund’s stake.
To complement Cap Table modelling, ScaleX offers a dedicated tool for modelling the impact of convertible instruments—often an overlooked component in ownership forecasting.
Convertible Debt Simulator: Model Dilution and Conversion Scenarios
Convertible instruments add uncertainty, particularly in early-stage investments. Their dilutive effect is often underestimated until a conversion event occurs.
The Convertible Debt Simulator from ScaleX Invest allows users to test various conversion scenarios based on market conditions, valuation thresholds, or maturity dates. Warrants, convertible notes, and other hybrid instruments can be modelled to estimate their fair value (under IFRS 9) and future impact on ownership.
This enhances NAV accuracy and aligns valuation methods with auditor and LP expectations.
Waterfall Model for Exit Scenarios: Simulate Value Distribution and Liquidation Preferences
Beyond ownership structure, a key layer of complexity lies in how value is distributed upon exit. Liquidation preferences, participating shares, and caps can materially alter distributions, particularly when several instruments coexist.
ScaleX’s Waterfall Modelling module allows asset managers to define rights attached to each instrument—such as carve-outs, participating or non-participating preferences, and conversion ratios. Based on these terms, users can simulate exit scenarios and assess how proceeds would be allocated across common and preferred shareholders.
A key advantage of this feature lies in its flexibility. Whether the objective is to assess LP value creation, prepare for exit negotiations, or respond to audit queries, users can compare multiple scenarios—including both base and upside cases.
In practice, this tool bridges the gap between high-level NAV models and the detailed projections expected by expert stakeholders.
Conclusion: A Clearer View of Ownership and Value Creation
Cap Table modelling is no longer a back-office task. It plays a central role in investment decisions, NAV calculation, and LP communication.
With ScaleX Invest, you can now manage, simulate, and report dilution and ownership dynamics with greater clarity and responsiveness.
FAQ
What is a Cap Table and why does it matter in Private Equity?
A Cap Table (capitalisation table) outlines a company’s equity structure. It tracks who holds shares, under what terms, and how these positions evolve over time.
How does dilution impact Net Asset Value (NAV)?
Dilution reduces the relative ownership of existing shareholders. If not properly accounted for, it can result in NAV being overstated.
What’s the difference between fully-diluted and non-fully diluted ownership?
Non-fully diluted ownership only considers currently issued shares. Fully-diluted ownership includes all instruments that could convert into equity (e.g. options, warrants, convertibles), offering a more prudent view.
What is a waterfall model and why should investors care?
A waterfall model simulates the distribution of exit proceeds based on the rights attached to each financial instrument. It ensures liquidation preferences are reflected before allocating value among shareholders.
How does ScaleX Invest model convertible debt instruments?
ScaleX Invest enables users to define key terms for each instrument (discount rate, cap, interest rate, maturity date) and simulates both their fair value and most probable conversion scenario. The resulting impact on NAV and ownership is integrated into the platform’s outputs.
