Convertible Note & Cap Table Math Guide for Louisiana

What this calculator does

Run this scenario in DocketMath using the Convertible Note Cap Table calculator.

DocketMath’s Convertible Note & Cap Table Math Guide (calculator: convertible-note-cap-table) helps you model how a convertible promissory note (typically) converts into equity and how that conversion changes your cap table in Louisiana (US-LA).

Practically, the calculator is designed to:

• Convert a note into shares using a chosen conversion price method, such as:

  • Discount to the next round price, and/or
  • Valuation cap (a maximum pre-money valuation used to set the conversion price).
• Apply common financing mechanics such as:

  • Principal + accrued interest (if you choose to include it),
  • Optional conversion vs. conversion at the “next qualified financing” trigger,
  • Rounding rules (shares often require rounding; the calculator can be configured accordingly).
• Output an updated cap table view showing:

  • How many shares the note holder receives,
  • How existing shareholders’ percentages dilute after conversion,
  • How fully diluted ownership changes (depending on which inputs you include).

When to use it

Use this calculator when you need a reliable way to quantify the ownership impact of a convertible note in a Louisiana business context. It’s especially useful at the moments below:

1) You’re negotiating terms (before signatures)

If you’re comparing a 10% discount vs. a $4M cap, you’ll want to see how each alternative changes:

• Conversion price
• Shares issued to the note holder
• Percentage dilution to founders/common holders

2) A priced equity round is approaching

Conversion often “happens” on a defined event (commonly a qualified financing). You can forecast the likely conversion based on:

• The next round’s price per share
• The round’s pre-money valuation (if your term uses cap math)
• Whether the note converts using discount, cap, or the lower of the two conversion prices

3) You’re reconciling cap table versions for investor reporting

Even small errors can compound—especially around interest inclusion, rounding, and whether you’re using fully diluted or issued-and-outstanding share counts. This tool helps you keep a consistent spreadsheet-free model.

4) You’re documenting your assumptions for diligence

If you’re preparing a board package or responding to investor questions, a clear “math narrative” helps. DocketMath’s outputs make it easier to document the assumptions you used (and what changes those outputs).

Step-by-step example

Let’s run a full example with realistic numbers and show how the inputs change the outputs. (You can mirror these steps in DocketMath’s calculator.)

Example setup

• **Start state (current cap table)

  • Existing common shares: 5,000,000
  • Option pool (if included in fully diluted): 500,000
  • Fully diluted baseline shares = 5,500,000 (for dilution math)
• Convertible note terms

  • Principal: $1,000,000
  • Interest rate (simple): 8% per year
  • Time to conversion: 6 months
  • Include interest in conversion: Yes
  • Valuation cap: $4,000,000
  • Discount rate: 20%
• Conversion event

  • Next round pre-money valuation (used to compute price per share): $6,000,000
  • Next round price per share: $1.50 (If your scenario instead provides a share price indirectly from pre-money + shares outstanding, use that relationship—this example uses a direct price.)

Step 1: Compute note amount including interest

If simple interest is used (common in notes, though not guaranteed):

• Interest = $1,000,000 × 8% × (6/12) = $40,000
• Total converting amount = $1,040,000

Step 2: Calculate the two candidate conversion prices

Most discount/cap notes convert using the more favorable price to the noteholder (lower conversion price), i.e. higher number of shares.

1. Discount conversion price

• Discounted price = $1.50 × (1 − 20%)
• Discounted price = $1.50 × 0.80 = $1.20

1. Cap conversion price A valuation cap typically sets a hypothetical conversion valuation:

• Cap valuation = $4,000,000

How to convert cap valuation into a per-share price depends on the note’s wording (and whether it references fully diluted shares). A common approach is:

• Cap price = Cap valuation / (fully diluted shares)

Using the fully diluted baseline shares:

• Cap price = $4,000,000 / 5,500,000 = $0.727272…

So the candidates are:

• Discount-based price: $1.20
• Cap-based price: ~$0.7273

The noteholder-friendly conversion price is the lower one:

• Chosen conversion price = ~$0.7273

Step 3: Compute shares issued on conversion

• Shares = Total converting amount / conversion price
• Shares = $1,040,000 / 0.727272… ≈ 1,430,000 shares (round as your terms require)

Step 4: Update the cap table and dilution percentages

Before conversion:

• Baseline shares (fully diluted baseline): 5,500,000

After conversion:

• New shares issued to note holder: ~1,430,000
• Total fully diluted = 5,500,000 + 1,430,000 = ~6,930,000

Ownership:

• Note holder % = 1,430,000 / 6,930,000 ≈ 20.64%
• Existing holders combined % ≈ 79.36%

DocketMath’s calculator should show these same outcomes, while making it easier to test “what if” variations (cap up/down, discount changed, interest included/excluded).

Common scenarios

Convertible note cap table math appears in a few repeat patterns. Use DocketMath’s calculator to pressure-test each scenario against the terms you’re modeling.

Scenario A: Cap-only note (no discount)

What changes:

• You compute conversion price using the cap valuation method
• The discount input is either not used or set to 0%

What to watch:

• Denominator for cap valuation (issued vs. fully diluted)
• Whether cap applies to the note’s principal only or principal + interest

Scenario B: Discount-only note (no cap)

What changes:

• Conversion price uses next round price × (1 − discount)
• Cap math is ignored entirely

What to watch:

• Whether the “next round price” is defined per share on an as-converted basis
• Rounding for share issuance

Scenario C: Cap + discount, take the “lower price”

What changes:

• You compute both:

  • Discount-based conversion price
  • Cap-based conversion price
• You take whichever yields more shares for the note holder

What to watch:

• Small differences can flip the outcome when cap-based price and discount-based price are close

Scenario D: Whether interest converts

Many models include interest in conversion, but not all. In DocketMath:

• Turn “include interest in conversion” on/off
• Observe the dilution shift

Rule-of-thumb impact: if interest is material and time to conversion is long, including interest can meaningfully increase ownership.

Scenario E: Multiple notes (stacked dilutions)

With more than one note:

• Each converts based on its own terms (cap/discount/interest)
• Total dilution is cumulative

DocketMath helps by consolidating the resulting issued shares into one updated cap table output—reducing the chance you dilute twice incorrectly.

Scenario F: Different conversion triggers

Some notes convert only when a financing meets criteria. If your trigger depends on thresholds (amount raised, minimum price, etc.), the conversion math only makes sense after you confirm the event happened.

Tips for accuracy

Use these checklist items to keep your inputs consistent and your outputs defensible for reporting and review.

Cap table denominator consistency

Pick one base and stick to it across the entire model:

Interest and timing

Rounding

Conversion price method

Louisiana jurisdiction context (documentation hygiene)

While your convertible note cap table math is mainly driven by your contract terms, you may also encounter timing and limitation periods when handling related disputes, claims, or enforcement

Related

Sources and references

Start with the primary authority for Louisiana and confirm the effective date before relying on any output. If the rule has been amended, update the inputs and rerun the calculation.

• Cal. Corp. Code § 25100

Related reading

• Inputs you need for convertible note cap table math in United States (Federal) — Input checklist with sourcing guidance
• Worked example: convertible note cap table math in North Carolina — Worked example with real statute citations
• Convertible note cap table math in California — Full how-to guide with jurisdiction-specific rules