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Conversion events

  • Updated

What is a conversion event?

A conversion event refers to the conversion of any convertible instrument (SAFE, ASA, convertible loan or similar) from a previous investment into shares in the issuing company. Conversion events occur under certain conditions and can happen very quickly or several years after the investment agreement was signed.

Odin does not charge for conversion events, but please note that you may incur additional costs in some scenarios.

If the investee company is registered in a country where notarisation of legals is required, like Spain or Germany, Odin’s standard notarisation fee will apply at the point of conversion if it has not already been applied.

German investments also typically require a separate, additional payment for the nominal value of the shares at the point of conversion. This is usually a small sum (<€2,000), and Odin does not facilitate its collection pro-rata from investors currently, since this is quite an involved administrative process. In practice, you can either request that the company reduce the number of shares you are issued in order to cover the costs of the nominal payment themselves, or you can pay the nominal fee yourself.

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Informing Odin of the conversion event

Please either contact Odin’s Customer Support team at hello@joinodin.com if a deal you completed is converting, or contact your Customer Success representative, if applicable. As outlined in the next section, the investee company will have to contact our Deal Operations team to sign the conversion documents.

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Signing conversion docs

As with any other Post-Close Legals, conversion legals may be signed by the syndicate lead if they are appointed as proxy, or by a representative from Odin.

If Odin is signing, the company should circulate the relevant documents to Odin for signature via Docusign (or similar), to our Legal team’s email address (legal@joinodin.com). The below signature block would still apply, with your branded entity in place of ‘Odin Investments Limited’ where applicable.

  • Signatory - Leave blank for Odin to complete
  • On behalf of - Odin Investments Limited
  • Address - Unit 105, 65 - 69 Shelton Street, London, United Kingdom, WC2H 9HE
  • Email - legal@joinodin.com

For conversion legals, Odin would only sign after seeking your approval as the Syndicate Lead. Odin will share the docs with you to review if you don’t already have access.

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Does conversion differ depending on the original agreement?

Practically-speaking, the above process does not differ greatly depending on the original investment type. In all cases, the conversion process involves the issuance of new shares to the investors in the SPV, based on the agreed-upon terms of the investment instrument and the valuation of the company at the time of conversion.

It's highly important for both the company, the syndicate lead and Odin to carefully review and understand the terms of the investment instrument, including the conversion mechanics and any associated rights or obligations.

Below, we’ve outlined the core differences between how each investment type converts into equity. Again, this has no real bearing on Odin’s process, but serves as a reference point for how each of these agreements function from a conversion standpoint.

  • Advance Subscription Agreement (ASA) - In an ASA, investors agree to subscribe for shares in the company at a future date, typically upon the occurrence of a specified trigger event, such as a future equity financing round or a 6 month long stop date. When the trigger event occurs, the investor's subscription amount is converted into shares at the predetermined price or discount specified in the ASA. The company then issues new shares to the investor based on the agreed-upon terms of the ASA. Note, for questions around how S/EIS tax relief is handled for ASAs, please see the tax section.
  • Convertible Loan Agreement/Note (CLA/CLN) - In a CLA/CLN, investors provide a loan to the company, which can convert into shares at a later date, typically upon the occurrence of a specified trigger event, such as a future equity financing round. Often there is an interest rate attached to the loan, meaning the loan converts at an agreed price, with the interest paid out as additional shares on conversion. The company issues new shares to the investor based on the agreed-upon conversion terms, effectively converting the debt into equity.
  • Simple Agreement for Future Equity (SAFE) - Unlike traditional convertible instruments, a SAFE is not a loan and does not accrue interest. Instead, it represents a promise of future equity in the company, usually at either:
    • A discount to the next qualifying financing round;
    • Capped post-money valuation, or;
    • A blend of both.
    • The company issues new shares to the investor based on the agreed-upon terms of the SAFE.

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How is this reflected in Odin?

Once conversion legals have been completed, Odin will include those docs in the same folder that your investors can access to see the original set of legals the deal was closed under.

Currently Odin does not update the investment documents that your investors hold and new information like the conversion share price and total number of shares held is not displayed in-platform, although we do keep a record of this.

If they need to your investors can, however, infer all relevant information, as well as understand their new shareholding, by comparing the conversion legals with the original documents.

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