Sellers in our Standard Deals are assigned an allocation order. This order is set on a first-come, first-serve basis. However, in certain cases, shareholders are assigned an allocation percentage. The allocation percentage determines how much of each subsequent dollar committed by investors to the deal goes to each seller. Let’s walk through an example.
There are three sellers in a deal: John, Jane, and Alex. After coming to an agreement amongst themselves, the sellers decide they want to be allocated according to the following percentages:
• John: 50%
• Jane: 30%
• Alex: 20%
This means that for every $100 committed by investors in the deal, John will be allocated $50, Jane $30, and Alex $20. These percentages hold until one of the sellers in the deal has their order filled, at which point the remaining orders will be filled proportionally based on the remaining percentages. Therefore, if John’s order is completely filled, then Jane will receive $3 of every $5 committed by investors (30% : 20%) and Alex will receive $2 of every $5 (20% : 30%).