Convertible Note & Cap Table Math Guide for Missouri

What this calculator does

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

DocketMath’s Convertible Note & Cap Table Math calculator helps you model how a convertible note converts into equity and how that conversion affects a company cap table in Missouri (US‑MO).

Use it to calculate, in plain math terms:

• Conversion price (either a fixed price or a valuation-capped price)
• Conversion mechanics based on:

  • principal amount
  • any accrued interest (if you choose to include it)
  • discount (if applicable)
  • valuation cap (if applicable)
• Post-conversion ownership for existing shareholders and the noteholder
• Fully diluted ownership impact after conversion, assuming a conversion event

Because cap tables are sensitive to input choices, the calculator is designed for iterative “what-if” modeling—change one input and watch how the ownership percentages shift.

Why Missouri shows up in this guide

Missouri law sets a 5-year statute of limitations for certain claims relating to written contracts and related civil actions covered by Missouri’s limitations framework. For Missouri, a commonly cited limitations period is 5 years under Mo. Rev. Stat. § 556.037 (with the statute described as 5 years, and an exception noted as O2 in the jurisdiction data you provided).
Source: https://law.justia.com/codes/missouri/title-xxxviii/chapter-556/section-556-037/

This matters operationally in two ways:

1. You’ll often preserve note and cap table records for multiple years (especially where disputes could arise about conversion accounting).
2. Your modeling should be audit-friendly, so you can reproduce the same math later if questions come up.

When to use it

DocketMath’s calculator is most useful when you need conversion ownership math that you can defend and reproduce. Consider using it in these situations:

• You’re approaching a priced equity round (or another stated conversion trigger) and need a clean view of:

  • how many shares the note converts into
  • what that means for pro rata rights and dilution
• You’re reconciling cap table records after a financing event and want to confirm:

  • whether conversion yields the expected ownership %
  • whether interest should be included in the conversion base
• You’re comparing two term sheets (e.g., 20% discount vs. valuation cap) and want to quantify dilution differences.
• You’re doing back-office cleanup:

  • multiple notes outstanding
  • partial conversions
  • competing caps/discounts
• You’re preparing board materials or investor updates and need consistent calculations across stakeholders.

Conversion math is input-sensitive

The calculator becomes especially valuable when at least one of these changes:

• Principal amount differs from what’s booked as “amount due”
• A valuation cap changes the effective conversion price
• A discount changes the conversion price independent of cap
• Interest inclusion changes the conversion base (and therefore shares)

Step-by-step example

Below is a worked example showing typical inputs and the outputs you should expect from DocketMath’s convertible-note-cap-table tool.

Scenario

• Company has 1,000,000 common shares outstanding pre-money.
• Existing shareholders:

  • Founder: 700,000 shares (70%)
  • Investor A: 300,000 shares (30%)
• Convertible note:

  • Principal: $500,000
  • Interest included in conversion base: yes (assume $25,000 accrued; total $525,000 for conversion)
  • Valuation cap: $4,000,000
  • Discount: 20%
  • Qualified financing (price per share): $5.00 per share
• Conversion occurs at the financing event.

Step 1: Determine the two candidate conversion prices

Most convertible notes use either:

• a discount conversion price based on the financing price, or
• a cap conversion price based on the cap divided by total post-money shares

…and then take the more favorable (lower) price to the noteholder.

For this example, we’ll calculate both.

A) Discount price

• Financing price = $5.00
• Discount = 20%
• Discount conversion price = $5.00 × (1 − 0.20) = $4.00 per share

B) Cap price To use a valuation cap, you convert the cap into an implied per-share price. The exact denominator depends on the note’s definition of how post-money shares are counted. A common approach is:

• Cap = $4,000,000
• Implied cap price = Cap / (post-money shares)

For illustration, assume the financing will create shares at $5.00/share for a $1,000,000 new investment (that’s 200,000 new shares), so:

• Pre-money shares: 1,000,000
• New financing shares: 200,000
• Post-money shares (assumed): 1,200,000
• Cap implied price = $4,000,000 / 1,200,000 = $3.3333 per share

Step 2: Choose the effective conversion price

The noteholder generally receives the lower of:

• discount price ($4.00)
• cap price ($3.3333)

Effective conversion price = $3.3333 per share

Step 3: Compute conversion shares

Conversion base (principal + accrued interest included in conversion base in this example):

• $500,000 + $25,000 = $525,000

Shares issued on conversion:

• Shares = $525,000 / $3.3333 ≈ 157,500 shares

Step 4: Update the cap table

Pre-conversion:

• Founder: 700,000
• Investor A: 300,000
• Total pre-money: 1,000,000

Financing shares (already created by the priced round):

• New financing: 200,000 shares

Add conversion shares:

• Convertible note: 157,500 shares

Post-conversion fully diluted share count (simple illustrative model):

• 700,000 + 300,000 + 200,000 + 157,500
• = 1,357,500 shares

Ownership percentages post-conversion:

• Founder: 700,000 / 1,357,500 ≈ 51.57%
• Investor A: 300,000 / 1,357,500 ≈ 22.10%
• New financing investor (call them Investor B): 200,000 / 1,357,500 ≈ 14.73%
• Noteholder: 157,500 / 1,357,500 ≈ 11.60%

Step 5: Track what changed (the practical output)

This is where DocketMath helps you quickly see:

• Dilution to each existing holder
• Noteholder’s resulting ownership %
• Total shares outstanding post-conversion

A compact “math snapshot” for this example:

Common scenarios

Convertible note conversions rarely happen in just one form. Here are practical scenarios the calculator can model by changing inputs, along with what to watch for.

1) Valuation cap only (no discount)

If your note uses only a cap, the effective conversion price is driven by the cap implied per-share price. The noteholder’s outcome is typically:

• more favorable at lower implied cap prices
• higher ownership for the noteholder when the company raises money at a higher per-share price (because the discount isn’t pulling them down further—only the cap does)

2) Discount only (no valuation cap)

With only a discount:

• conversion price = financing price × (1 − discount)
• noteholder receives more shares when the financing price is higher (because the discount creates a lower conversion price than the round price)

3) Both cap and discount (choose the lower conversion price)

When both exist, the note’s “most favorable” rule is the key:

• effective conversion price = min(cap-based price, discount price)
• noteholder shares increase when either mechanism yields a lower price

4) Interest handling differences

Two notes with the same principal can yield different share counts if:

• one includes accrued interest in the conversion base
• the other converts only principal

For that reason, model both versions during negotiation or reconciliation:

• principal-only
• principal + accrued interest

5) Multiple convertible notes outstanding

Cap table impact can be cumulative:

• Each note converts independently (unless your agreement specifies otherwise)
• Ownership % for everyone changes as total post-conversion shares grow

A practical workflow:

• run one note at a time to sanity-check share outputs
• then run combined to confirm final percentages

6) Recordkeeping and time horizons (Missouri context)

Missouri’s 5-year limitations framing under Mo. Rev. Stat. § 556.037 (as provided: 5 years, exception described as O2) is a useful reminder for operational discipline: preserve the inputs and the conversion math you used.

You don’t need to litigate to benefit from this. Good modeling habits include:

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