[Question]: Why is pro_rata a numeric type?

[Thibauld Favre]

Hi there,
I started digging in the open cap table format (and I love it) but, when reading about the pro_rata field in the ConvertibleIssuance class, I was surprised to see it defined as a Numeric type 🤔

src: https://github.com/Open-Cap-Table-Coalition/Open-Cap-Format-OCF/blob/main/docs/schema_markdown/schema/objects/transactions/issuance/ConvertibleIssuance.md

In the example above (from the repo), pro_rata: 2500 for a SAFE and... I am puzzled on how to interpret this 2500 and couldn't find the answer.

[JSIV]

Thanks @thibauld, we will take a look at our notes on this and revert. While we do that, do you have a sense of what you'd like to see here or what would make more sense?

[Thibauld Favre]

Good question! I asked my best friend chatGPT about the different types of pro-rata and it seems that there are 2 big family of pro-rata:

1. ownership based. Investor has the right to maintain or increase (super pro-rata) his ownership in the company
2. amount based. Investor has the right to invest again up to a certain dollar amount, rather than a percentage of the round.

So I'd say something like this could make sense (to be improved of course):

"pro_rata": {
   "type": [percentage|amount]
   "value": number
}

Example 1: investor has the right to re-invest up to $1M

"pro_rata": {
   "type": "amount"
   "value": 1000000
}

Example 2: investor has the right to increase his ownership by 20%

"pro_rata": {
   "type": "percentage"
   "value": 120
}

Wdyt?

[JSIV]

Initial TWG reaction:

We need to review in more detail, but both approaches are probably required to some degree. Probably a lot of overlap with some similar issues we've dealt with for Warrants. To review in more detail. @thibauld, interested in joining a Technical Working Group call to discuss?

[Thibauld Favre]

Hey @JSv4, sorry I am seeing this message a bit late but sure, I'd love to!
Fwiw, I am not a securities lawyer though so my legal knowledge is limited. If that's not a requirement, happy to join.

[Victor Mimo]

+1 on a technical working group.

[Thibauld Favre]

Hey @JSv4 👋 I just wanted to know if there had been any change or evolution regarding the pro_rata field. From the documentation, it seems like it is still an integer and we're puzzled as to how to use it :)
Happy to join the next technical working group meeting to discuss this if it's useful 👍

[JSIV]

Hey @thibauld, I'd suggest two things:

1. Let's go back and see what notes we have on the original discussion. It feels like a compromise we struck way back when to accommodate different vendors' schemas.
2. Can you propose what you'd like to see here?