When you invest in a Safe, you will become an investor, but not an actual shareholder of stock, unless the company elects to convert the Safe into company stock. Since there is a fixed conversion price, you will always receive the same economic outcome (regardless of whether the company elects to convert) if and when there is a liquidity event.
The company may also choose to include a “valuation cap” or “discount” (or both) in the Safe.
A valuation cap specifies the maximum valuation an investor will convert their investment into shares. At a financing event (specified in the Safe), investors will convert at the lower of the valuation cap or the price in the subsequent financing.
A discount provision gives an investor a discount to the valuation in a future round of financing; the investor will convert their investment into shares (or cash) at the discounted valuation.
You will not receive a cash or stock return on your investment unless one of the events specified in the Safe offering documents occurs. Generally, you will be waiting for the company to either (a) go public or (b) get acquired by another company. It is important to understand that these securities are not easily traded or sold.
In the event of a subsequent equity financing, the company may elect to “Roll-over” Safe holders and continue the terms of the Safe, or to convert the investment into preferred stock.
If there is a liquidity event during the term of the Safe, you may elect to have your cash returned or to convert the Safe into company stock based on the purchase price and fair market value of the shares.
Republic does not verify information provided by companies on this Portal and makes no assurance as to the completeness or accuracy of any such information. Additional information about companies fundraising on the Portal can be found by searching the EDGAR database.