Cap Table Analysis

How Does an Investor Analyse a Cap Table?

Reddit's public filings show why a cap table needs a control analysis as well as an ownership analysis. What the filing shows. At Reddit's June 8, 2026 annual meeting, Class A and Class B shares voted together, but the classes did not carry equal voting power. A holder's percentage of outstanding shares can differ sharply from its percentage of votes when a company has multiple voting classes.

Reddit reported that each Class B share carried 10 votes while each Class A share carried 1 vote. The filing is a public example, not a Frontierspace investment or result.

What Cap Table Analysis Should Answer

A reliable review moves from legal ownership to forward-looking economics.

Who holds each class or instrument, and how many securities are issued and outstanding?
What changes when options, warrants, restricted awards, SAFEs, notes, and other convertible securities enter the denominator?
How will new money, conversion mechanics, and an option-pool increase change every holder's stake?
Which holders can vote, appoint directors, block actions, or exercise protective rights?
How do debt, liquidation preferences, conversion choices, fees, and carry affect proceeds?

Start With the Right Denominator

The calculation makes the effect easier to see. A $40 million pre-money valuation divided by 10 million pre-money fully diluted shares implies a $4.00 price per share. If the agreed denominator is larger because it includes additional pool shares or converting instruments, the price per share falls even though the stated valuation is unchanged.

"Ownership" is incomplete unless the calculation states what is included. Review at least issued and outstanding, fully diluted, and pro forma ownership side by side.

Four Views of the Same Capital Structure

No single ownership percentage captures the current record, future dilution, control, and exit proceeds.

Review process Process

Issued and outstanding Shares legally issued and currently outstanding by holder and class. Answers: Who owns what today?

Fully diluted Adds the equity and convertible instruments specified in the chosen denominator. Answers: What is the ownership base before a new transaction?

Financing pro forma Applies new shares, conversions, pool changes, and transaction-specific terms. Answers: What changes at closing?

Exit waterfall Applies senior claims, preferences, conversion choices, and vehicle economics. Answers: How might proceeds be allocated?

View process data and assumptions

Cap table review views, principal inputs, and questions answered
Review view	Principal inputs	Question answered
Issued and outstanding	Stock ledger, class, holder, issued shares	Who owns what today?
Fully diluted	Outstanding shares plus specified options, awards, warrants, and convertibles	What is the analytical ownership base?
Financing pro forma	New money, price, conversions, option-pool change, new security	What changes at closing?
Exit waterfall	Exit value, debt, preferences, conversion, fees, carry	How might proceeds be allocated?

Assumptions: General diligence process only. The selected fully diluted definition and the actual legal documents, side letters, and transaction agreements control.

Sources: NVCA Model Legal Documents and Carta's pro forma cap table guide.

Reconcile the Cap Table to Source Documents

A tidy spreadsheet is useful, but it must still match the legal records. Trace each material line to an underlying legal record.

Corporate records: Current charter, stock ledger, board and shareholder approvals, and certificates where applicable.
Financing documents: Stock purchase, investor-rights, voting, and transfer agreements.
Employee equity: Approved equity plan, pool authorization, individual grants, vesting, exercises, cancellations, and repurchases.
Other instruments: SAFEs, convertible notes, warrants, restricted awards, side letters, and acquisition consideration.

The NVCA financing-document set, current on July 25, 2026, shows how the charter, stock purchase agreement, investor-rights agreement, voting agreement, and transfer agreement work as an interlocking package. Actual company documents may differ and should be read on their own terms.

Build the Financing Pro Forma

The figures make the effect easier to see. A $10 million investment at a $40 million pre-money valuation equals 20% of the simple $50 million post-money value. That percentage is only the starting point: pre-money option-pool expansion and converting securities can change the allocation borne by existing holders.

Model the transaction in a sequence that can be audited:

Freeze the current table: Record the date, version, and source documents.
Apply conversions: Calculate each SAFE, note, warrant, or other instrument under its own terms.
Size the option pool: Distinguish granted, exercised, cancelled, and unallocated shares.
Issue the new security: Use the agreed price per share and financing definition.
Recalculate every holder: Show shares, fully diluted percentage, voting power, and class.

Track Dilution Across Events

A short example shows why. An original stake diluted by 20% and then by another 15% retains 68% of its starting ownership because 80% multiplied by 85% equals 68%. Sequential dilution should be compounded, not added.

Keep a bridge from one cap table version to the next. The bridge should identify whether a change came from new financing, pool expansion, grants, exercises, conversion, anti-dilution adjustment, transfer, repurchase, or cancellation.

Read the Option Pool Separately

Carta's Founder Ownership 2026 report, published March 13, 2026, found that the median employee equity pool at Series C was 16.8%, slightly above median founder ownership of 16.1% in its dataset. This is a descriptive benchmark, not a target for any company.

An option-pool line can hide several different questions:

How much of the plan is approved, granted, exercised, cancelled, or still unallocated?
Which holders absorb a proposed pool increase?
Does the requested pool match a role-by-role equity budget through the next expected financing?
How do outstanding awards and future grants affect the fully diluted denominator?

Separate Economic Ownership From Control

Share count alone may not describe influence over the company.

Voting classes: Different classes may carry different votes per share or no vote on ordinary matters.
Board rights: Appointment and observer rights may sit with a class, investor, or ownership threshold.
Protective provisions: A minority holder may have consent rights over financings, sales, amendments, or other major actions.
Threshold rights: Information, pro rata, registration, or governance rights may end when ownership falls below a specified level.

Model Exit Economics

A pro rata ownership percentage does not by itself equal a pro rata share of exit value.

Senior claims: Debt, transaction expenses, and other priority payments may reduce value available to equity.
Preference stack: Establish the multiple, seniority, participation, cap, and accrued amounts for every preferred series.
Test when each preferred series receives more by converting to common.
Vehicle layer: Apply SPV expenses, management fees, and carry where the investor owns a vehicle interest rather than direct shares.

For a deeper treatment of these mechanics, see share class, preference, and capital-structure analysis.

Cap Table Diligence Questions

What date does the table reflect, who maintains it, and what changed since the prior version?
Are all equity classes, awards, warrants, SAFEs, notes, side letters, and transfer commitments included?
Which securities are included in each ownership percentage, and does that definition match the financing documents?
Can every issuance, grant, transfer, and cancellation be traced to the required authorization?
How do ownership, voting power, and proceeds change under the proposed round, a down round, a pool increase, and several exit values?
Which discrepancies remain open, who owns them, and could they affect closing or economics?

Rebuilding the Ownership From the Source Documents

In our review, we believe cap table analysis should connect the legal record to the investment case. That means asking whether ownership is calculated on the right denominator, whether future financing needs can dilute the position, whether control rights match the headline stake, and whether the preference waterfall supports the expected outcome. The objective is not to reduce a company to a spreadsheet. It is to understand how the security behaves across financing, governance, and exit scenarios.

Frequently Asked Questions

What is a fully diluted cap table?

It is an ownership view that includes outstanding shares plus the options, awards, warrants, and convertible securities specified in the chosen definition. Because definitions vary, the included instruments should be stated explicitly.

Is a pro forma cap table the same as the legal stock ledger?

No. The stock ledger records issued ownership, while a pro forma models what ownership may look like after a proposed transaction. Signed documents, approvals, and completed issuances establish the legal result.

Why can ownership percentage differ from voting power?

Multiple share classes, voting agreements, board rights, and protective provisions can allocate control differently from economic ownership.

Can a cap table predict investment returns?

No. It can support scenario analysis, but returns also depend on company performance, future financings, exit value and timing, security terms, fees, and the actual transaction documents.