[byrneseyeview]

Well, they own a stake through Justin.tv. If Justin.tv makes a good deal, it will naturally be a good deal for investors.

An example might clarify it. Let's say Justin.tv thinks SocialCam is worth $1 million. So, those 100 shares are worth $10,000 each. In the scenario above, SocialCam might:

- Sell 50 shares to an outside investor, for $500K. (So there are now 150 shares. But the company is worth $500K more, or $1.5 million. $1.5 million / 150 shares = $10K per share, the original price).

- Grant options with a $10K strike price. This would dilute existing investors, and thus slightly reduce the value of their stake. But a) this is standard for many companies--they issue shares to managers, and figure that the equity incentive pays for itself through higher performance (see http://paulgraham.com/equity.html ), or b) SocialCam's founding team might exchange their Justin.tv shares/options for SocialCam shares/options. As long as investors agree on the value for both companies, that's a fair deal.

I hope that explains it. This kind of thing is usually done with board approval, after discussion with the board, so it's unlikely that anyone did anything underhanded.