What is Supposed to be Included in a Cap Table?


In its simplest terms, a capitalization table, better known as a cap table, is a form, usually a spreadsheet, usually used by start-up companies, as a way to track all of the companies securities, including common and preferred shares and who owns them, warrants, and anything having to do with ownership.

What is a Cap Table For?  

When kept properly, a cap table will tell you who owns the company and their percentage of ownership, as well as the value of their securities and their loss of equity over time. 

In the creation of a new company, cap tables are routinely created before other company documents. It is common for cap tables to become quite complex after the first few rounds of financing because they should include all sources of potential funding, as well as all transactions, including Initial Public Offerings (IPOs) and mergers and acquisitions.

The company’s cap table helps company officers to cast votes the right way and to protect the company stockholders’ economic rights. However, it also helps the company protect itself when granting or issuing new securities.

Using the information in the cap table, the existing officers will know better how their own shares will be diluted when they offer new shares. This is important because without a working cap table, officers in the company may end up selling more shares than are available, which can create trouble with regulators.

What is Included in a Cap Table and Why?

In all cases, a useful and functional cap table will include a summary of the company’s current ownership by the type and class of securities they own. The cap table should also include the date of the grant of the equity, the exercise price and the vesting period, when applicable.

In many cases, a company can and will offer the following types of securities, from the very time they are formed:

  • Preferred Stock is a form of capital stock where stockholders are granted preferential treatment over common stockholders. Preferred stock usually cmes with dividend payments and special voting rights and dividend payments. .
  • Common Stock is the most basic form of capital stock. Usually issued to angel investors, employees and founders, common stockholders have rights that are very valuable, like voting and economic rights, but they are still subservient to holders of preferred stock.  
  • Options are issued to include a right to buy common stock at a special price during a specific time period. Usually, options are issued to employees to serve as something of an incentive to keep them with the company.
  • Warrants are issued by a company along with extra rights. Many warrants grant  stockholders the right to purchase preferred or common stock at a special  price within a specified time usually about a decade.

What Else Does a Cap Table Tell You?

The primary purpose of a cap table is to keep track of the types of stock issued and how much ownership they represent. It’s not possible to know how much stock to issue and which type, unless you know how much has already been issued.

In addition to recording transactions, a properly devised cap table also should include many legal documents, including dates and vesting options for stock issuances, transfers and cancellations.

All of this information is necessary for company executives and others to be able to manage such transactions accurately. It is absolutely essential for those in charge to know which events have happened since the establishment of the company. At some time or another, regulators will want to know and someone will have to inform them accurately