Advertisement
U.S. markets closed
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow 30

    39,807.37
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Russell 2000

    2,124.55
    +10.20 (+0.48%)
     
  • Crude Oil

    83.11
    -0.06 (-0.07%)
     
  • Gold

    2,254.80
    +16.40 (+0.73%)
     
  • Silver

    25.10
    +0.18 (+0.74%)
     
  • EUR/USD

    1.0776
    -0.0017 (-0.16%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • GBP/USD

    1.2623
    +0.0000 (+0.00%)
     
  • USD/JPY

    151.3600
    -0.0120 (-0.01%)
     
  • Bitcoin USD

    69,846.54
    -738.76 (-1.05%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,369.44
    +201.37 (+0.50%)
     

Tech investors are increasingly finding ways to block companies from going public

block
block

(Koki Nagahama/Getty Images)

Tech investors are increasingly writing veto rights into their term sheets to make sure a company goes public at a certain price — or else.

In a new report from The Information, a review of 136 term sheets found that the practice is on the rise as venture capital funding chills.

In The Information's analysis, only 15% of the term sheets of highly valued companies had IPO blocking rights during the first three quarters of 2015. From when the "great reset" in venture capital began in Q4 of 2015 into the new year, the number rose to 24%.

What does this mean for companies? Investors can basically veto an initial public offering if the price isn't to their liking. Fintech company Affirm, for example, gave some of its investors rights to block an IPO if it wasn't priced at 2.5 times as much as its latest valuation. DoorDash investors can veto if it's less than three times its latest valuation.

It's not a lost cause if a company prices too low. Investors could negotiate for extra shares to let it go through at the last minute. The rise of veto rights, though, means startups have yet another hurdle to clear before going public.

You can read The Information's full report here.

NOW WATCH: The things you can see through this Florida startup's augmented reality headset will blow your mind



More From Business Insider

Advertisement