An inventor client is looking for investment of £300k for a 10% stake in their company. The company is loss making, but has a patent-pending product that has potential, but investment is required in order to make this happen.
Shareholding at present is
51% Mr A (510 x 1p shares)
47% Miss B (470 x 1p shares)
2% Mr C (2 x 1p shares)
Miss B is the divorcee of Mr C and has put a lot of time into the business previously. She wants to sell her shares and is happy to sell for £30k.
Client wants part of the 300k outside investment to be used to buy back the shares from Miss B.
My opinion is that an outside investor unlikely to agree to this for several reasons; not least, why would an investor pay 300k for a 10% stake when an existing shareholder is willing to give up 47% for £30k? I also wouldn't imagine an investor would be happy to see part of their investment used to buy out existing shareholders.
Before I go back and oppine that the client probably needs to rethink this, I wanted to confirm that it's not just me who thinks this is odd?