Xpert Financial Reveals New Term Sheet, Valuation Controls

Xpert Financial, which is developing secondary trading and direct-to-investor fundraising platforms, has established new term sheet and valuation controls for private companies seeking to raise capital from private market investors. The controls are part of its XPO platform for private companies and shareholders.


San Mateo, Calif. – San Mateo, Calif – Xpert Financial, Inc. today announced new term sheet and valuation controls for private companies seeking to raise capital from
private market investors. The company controls are part of Xpert Financial’s private offerings,
known as Xpert Private Offerings (or XPOs), which allow private companies and their
shareholders to list primary and secondary shares, respectively, for purchase by investors that
are pre-approved by the company.

“Over the past two years, in conjunction with developing our electronic capital raising and
trading platform, we worked closely with investors and high-growth private companies to create
a standardized set of qualified information that accelerates the investment decision process
from two-to-four months down to two weeks,” said Thomas Foley, CEO Xpert Financial. “With
an increasing number of QIBs and other sophisticated investors looking to private growth
companies for the returns they once found in public growth equities, the time is right to
provide companies with the controls they need to manage their interactions with sophisticated

As part of a primary XPO, the listing company sets the terms under which it will sell its shares
as part of the offering. This includes establishing a minimum valuation for the company,
choosing what type of stock it will issue (common or preferred), how many shares it will sell
and what rights those shares will contain. This represents a significant departure from current
industry practices, wherein an investment bank (in the case of a private placement) or venture
capital firm establishes the company’s valuation and sets the terms of the offering. In this way,
an XPO enables private companies to retain greater control over their shares and their futures.

The XPO term sheet offers the listing company with a number of options for managing its
shareholder base. For example, shares on Xpert ATS are auctioned in company-defined “lots.”
Setting the number of shares appropriately for each lot can help control the number of
shareholders, thereby helping to ensure that companies do not exceed the 499-shareholder
limit, which is the SEC’s threshold for reporting. Or, companies may want to put a cap on the
number of different entities that can buy shares in an offering in order to reduce overhead
when dealing with shareholders. Alternatively, to help prevent an undesirable concentration of
ownership, a company may set a maximum on the number of lots that a bidder can place bids

In addition to establishing a valuation and share specifications, the listing company uses the
term sheet to set the offering’s opening and closing dates, the auction type and provisions for
an undersell at the auction. This latter provision helps mitigate the potential uncertainty that the
company’s valuation entails by enabling the company to accept an offering that is undersold
(i.e., not all of the company’s shares attracted acceptable bids) by any percentage up to 25
percent. The company must include the undersell provision—including the percentage of
undersell it is willing to accept—in the term sheet prior to the auction.

Once completed, the term sheet becomes the basis for generating the company’s offering
documents, which are the actual legal documents that will effectuate the sale after the
completion of the auction. These typically include the stock purchase agreement, voting
agreement, investor’s rights agreement and right-of-first-refusal and co-sale agreement. Some
details within these documents will be contingent on the sale; as such, the listing company must
agree to allow Xpert to fill in these details as part of Xpert’s proprietary auto-execution and e-
signature function. Along with the term sheet and offering documents, the listing company must
also provide Xpert with all legal documents that govern their outstanding shares.

Xpert Term Sheet Elements
• Company valuation
• Number and type of shares
• Lot size
• Auction type
• Offering open/close dates
• Undersell provision
• Other stipulations/restrictions