Equity Kicker

It's set. It’s hiked. It’s up. It’s gooooooddddd.

Okay, yeah, you knew we were gonna start there.

In FinanceLand, an equity kicker is usually a deal sweetener for debt. So…Shmoopicon Valley Bank loans whatever.com 5 million bucks at 8 percent interest.

But with a catch.

The bank doesn’t feel that 8 percent is enough to cover the risk and other crap that whatever.com brings with it. They ain’t Google. So in addition to the 8 percent interest, Shmoopicon Valley Bank wants an equity kicker in the form of 3 percent warrant coverage.

That is, they want 3 percent of the value of the loan of 5 million...or 150,000 shares of whatever.com thrown in as part of the deal. Those 150,000 shares are equity, and they kick the debt deal to be worth a lot more, should things go well at whatever.com.

But, um, we’re not hopeful.